On Friday, May 29, executives from DHL Supply Chain North America shared insights on the transportation and logistics sector of the economy amid the coronavirus pandemic.
Describing the business climate as a “whirlwind,” President Jim Monkmeyer said that mixed demand for truckload and less-than-truckload shipments has resulted in carriers furloughing drivers and parking equipment to keep their costs at bay.
E-commerce was hot before the pandemic. The continued strong demand has benefited parcel carriers and airfreight volumes. It will continue to be a major area of focus for DHL Supply Chain North America, which is putting more investment into technologies and assets to provide omni-channel offerings.
The discussion included the topics of near-shoring, market stabilization and how COVID-19 has accelerated market trends.
More border traffic
During the coronavirus pandemic, the company has not seen a shift in domestic and international freight volumes due to customers moving their supply chains from Asia to North America. If near-shoring takes place, Mexico would be the obvious place because of a new NAFTA agreement coming into play.
“Hopefully, that will work in favor of our customers in terms of looking at near-shoring,” Monkmeyer said. “It makes sense if the infrastructure is there to support it.”
Like other parts of the world, Mexico has seen a major slowdown in manufacturing, particularly with northbound automotive and technology-related products, said Tim Podman, senior director of carrier development and sourcing.
With the reopening of manufacturing in Mexico at the end of May, “we certainly expect traffic to pick up at the borders,” Podman said.
DHL Supply Chain North America started 41 years ago and has become the largest and fastest-growing third-party logistics provider. Today it manages billions in transportation spend for shippers with a dedicated transportation unit that contracts with more than 6,000 carriers.
The company has dedicated fleet operations with more than 2,000 tractors and 485 warehouses throughout North America and continues to invest hundreds of millions in people and technology, Monkmeyer said.
As freight volumes have sagged, DHL Supply Chain has reallocated carriers as well as its own drivers and resources from sectors experiencing subdued demand to use them in areas with higher demand. The company has been sticking with its core carriers and isn’t increasing bid activity for lanes until the market stabilizes, he said.
Overall, DHL Supply Chain North America and its customers are not chasing cost reductions and “taking advantage of the market at this point of time,” Monkmeyer said.
Toward the end of May, the truckload sector has seen a “little bit of a ray of hope” with the produce season in full swing for the Southeast and West Coast markets. Other areas of the country will likely be a “slow road” until the peak retail season in the fourth quarter, he predicted, noting that the retail season will be “considerably softer than previous years.”
The gap between spot and contract rates has closed slightly in the past few weeks, which indicates that “things are picking up a little bit,” Monkmeyer said, but he does not expect a recovery until other sectors of the economy such as manufacturing come back.
Impacts from COVID-19 will be less of a disrupter and more of an accelerator of trends already playing out in the transportation industry, Monkmeyer predicted. One trend is that technology is making it possible for companies to operate in a virtual environment.
DHL has seen its productivity improve by workers cutting out their commute, and its customer service has “been there throughout the pandemic,” he said. The company is considering making a fundamental change that will allow workers more flexibility to work from home.
Like many companies, DHL Supply Chain also has benefited from using new technology and strategies to “recruit, train and operate our dedicated fleets,” he said.
Another trend that COVID-19 has accelerated is outsourcing transportation management to 3PLs for shippers to gain more flexibility and capability as well as to mitigate risks by having more redundancy in their freight networks.
Monkmeyer also sees an increased focus on data analytics. DHL is using artificial intelligence (AI) and predictive analytics to predict pricing and capacity in the market. It recently rolled out a big data tool for optimizing transportation planning decisions that works with another proprietary tool, Resilience 360, used by its customer account teams for freight visibility and exception management.
During the media briefing, Monkmeyer also discussed DHL’s interest in electric and autonomous vehicles, with anticipation of a driver shortage reappearing at some point in 2021. He said DHL anticipates new legislation at a national level by the end of the year on autonomous vehicles that will accelerate adoption of the technology in three to five years.
The company has invested in 10 Tesla electric tractors and is expecting to take delivery in late 2021. It also is talking to other providers to “see who gets there first” for both all-electric vehicles and fuel cells that will support a range of vehicles.