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Just how important is getting it right in the first mile out of the port?

For buyers, shippers, brokers, and carriers, drayage is a high-stakes balancing act of matching supply and demand with capacity.

Drayage is the moving of goods by truck from or to an ocean port from or to an inland port, warehouse, or intermodal terminal typically in the same metropolitan area. Successful transport relies on the syncing of many moving parts, and stiff penalties such as fines and fees can await shippers and carriers when they stumble. These costs hurt (especially for the smaller players) but the systemic impact can be far more significant.

 

Let’s explore some drayage mistakes and both the immediate and more profound costs of these blunders.

 

WHEN SHIPPING GOES SIDEWAYS

 

Inaccurate Forecasting

For shippers, forecasting is critical to first-mile success, yet many continue to miss the mark. Accurate predictions are never easy, and the shifting trade landscape resulting from the US-China trade war has only made forecasting that much more difficult.

 

When forecasts are off it can be abundance or scarcity—either drayage capacity sitting idle or loads never getting picked up. For example, in January of 2019, many drayage companies under forecasted their numbers resulting in more volume than predicted. In this scenario, loads sit, revenue and income shrink, and customer service suffers.

 

The months following saw an overcorrection, with hyper-aggressive forecasted numbers resulting in drayage carriers sitting idle or going home and shippers often still responsible for footing the bill.

 

Changing Delivery Instructions

Remember the old saying about not changing the rules in the middle of the game? It never applied more than in the shipping industry. When shippers change delivery instructions such as rerouting the delivery to a different location, it can trigger a series of effects—none of which benefit drayage.

 

The new destination often isn’t prepared for the unexpected volume—this can create added congestion, equipment shortages, and compromised efficiency. Carriers get stuck in long lines with extended unload time that can trigger detention fees for shippers. The extended unload fees for truckers can range from $30 to $50 per hour and $25 to $90 for equipment engaged over contracted time. If cargo sits, the shipper’s wallet takes another hit—demurrage fees range from $75 to $150 per container per day increasing over the stay.

 

Rerouting also contributes to equipment dislocation and shortages (especially chassis) and can trigger “empty mile” trips. These dry runs can incur bobtail fees typically ranging from $200 to $400. With the estimated 65 billion empty miles per year truckers drive, it’s easy to see how expensive a change of plans can become.

 

Changing routes and the resulting congestion costs carriers too—their income suffers as they aren’t able to make as many trips. Department of Transportation numbers indicate detention time is responsible for an estimated 1.1 to 1.3 billion dollars of lost trucker income annually.

 

Failing to Prepare for Customs

To err is human and mostly pardonable but to show up unprepared is, well, not. U.S. Customs requires a boatload (pardon the pun) of documents and forms for shippers including bonds, licenses, permits, certificates of origin, and commercial invoices. Many shippers bog down in Customs simply because they don’t have their paperwork in order.

 

Inaccurate or incomplete paperwork brings at least an inconvenient delay—possibly resulting in missed appointments, late deliveries, and angry customers. Negligent documentation can incur fines up to four times the duty or 40% of cargo’s value. If fraud is proven, the entire load can be seized or fines up to full value of the shipment levied.

 

 

WHEN TRUCKERS GET IT WRONG

As challenging as the first mile is for shippers, it can be just as daunting for carriers, especially since strict ELD enforcement went into effect. Ah yes—that ELD mandate.

 

Failing to Plan for Hours of Service Restrictions

For carriers, planning their work schedules is vastly more difficult in today’s landscape of strict ELD enforcement. Many are failing to plan or miscalculating their hours of service (HOS) and getting stuck with two choices. Neither is desirable but both preferable to paying the stout fines for HOS violations which can range from $1000 to $10,000 with the average penalty being $2,867.

 

Drayage carriers approaching their HOS limit can choose to park the load, go off duty for the required ten hours of rest, then resume their journey. This option dramatically increases transit time, often resulting in missed appointments and late deliveries. A second option is dropping the load for another carrier and thus incurring added operational cost for the shipper as well as the fallout from late delivery.

 

Going on AutoPilot

This phenomenon is especially prevalent if a trucker is familiar with the lane and customer—human nature takes over, and the routine details of a delivery shift to auto-pilot. When critical instructions such as delivery window, door dock, or location inevitably change the results can be chaotic. Ultimately, the system bogs down and revenue, income, and customer service all take a hit.

 

Lacking Transparency

Drayage succeeds or fails based on clear, consistent, and accurate lines of communication between all moving parts. Unfortunately, many carriers today fail to maintain transparency regarding their location, capacity, and schedule.

 

When carriers go dark complexities mount for shippers and brokers as they no longer have access to the information they need to match supply and demand with capacity. Kind of like trying to play chess blindfolded, they are left guessing, and the entire drayage ecosystem suffers.

 

PARTING THOUGHTS

When mistakes occur in the first mile, the shockwaves are felt by all in this tightly woven industry. Shipper missteps impact carriers—and vice versa. The cost of fines and fees sting at the moment, but the real impact of first mile blunders penetrates far deeper. Drayage miscues result in systemic inefficiency—dislocated equipment, idle carriers, and undelivered freight. Shippers lose revenue and reputation, carriers lose income, customer service plummets, and these are the costs nobody can afford.

If you were to poll a group of people on what the word “Drayage” means, you might get five different definitions. How can one of the most important steps in the supply chain and a vital component of the global trade market cause so much confusion? Let’s break it down:

What is Drayage?

By definition, drayage is the transport of freight from an ocean port to a destination. It’s also often described as the process of transporting goods over short distances, aka “The first mile.” Now, you may be thinking, what’s the big deal? Surely the first mile can’t be that complicated.

Think of it like this: One container’s journey from ship-to-shelf (or final destination) is akin to a row of dominoes. Drayage is the first domino to fall. If the first domino doesn’t fall correctly, it affects the entire row.

 

While the term drayage specifically refers to short distance movements as part of the supply chain process, the term is mainly used by the container shipping industry. Drayage loads typically have departure and arrival points in the same metropolitan area and do not focus on long haul or national movements.

Because a drayage load can have many connotations, there tends to be confusion among carriers on how to classify it. Many carriers simply equate “drayage” with having to go into a port, which isn’t always the case. While all drayage loads tend to originate at a port of entry, there can be several legs of a drayage load (port, yard, warehouse, rail) before the container arrives at its final destination.

While drayage may seem like a small step of the process, it’s an integral part of the logistics industry and vital to the overall supply chain management process across the United States. That two-day shipping you love — where you press a button on your computer or app and something magically shows up at your door two days (sometimes faster) later… Drayage plays a huge part in that. In fact, “the first mile” sets the tone for the entire journey from ship to shelf.

Why is Drayage so important?

There are several large ports across the United States from Seattle, NY, NJ, Georgia, Oakland, Houston and Miami. That said, over one quarter of the total container trade in North America travels through the ports of Long Beach and Los Angeles. Annual trade movement at the Long Beach Port alone is valued at $194 billion annually.

Combined, the San Pedro Bay Complex (LA + Long Beach) make up 32% of the nation’s market share and 73% of the west coast.

As the gateway to the Asia trade market, the San Pedro Bay Complex is crucial when it comes to drayage. The LA drayage marketplace is a $60B a year industry.

With that amount of money on the line in a given year, it’s somewhat surprising that congestion and inefficiencies are still huge problems at the ports. It’s generally known that major delays, driver frustration, financial penalties and missed deadlines are key factors and pain points in dealing with drayage loads. Some contributing factors are lack of chassis, not enough carriers and overwhelmed terminals that simply can’t keep up with demand.

Peak season can also cause major delays and problems at the ports. August through December leading up to the holidays tends to be the busiest time of year for massive backlogs of ships and delayed containers.

NEXT CEO, Lidia Yan knows the challenges all too well.

“If you go to Silicon Valley, nobody knows what drayage is. If you go to Wall Street, no one has ever heard of drayage. It’s our job to tell them how important drayage is – how important the first mile is. 30% of inbound freight comes into this city and the 36,000 warehouses here. This is the core of the economy. If the LA ports don’t move, we don’t have any clothes to wear, food to eat, raw materials to use.”

However daunting the process may seem, where challenges exist, so do opportunities for solutions.

“We need to automate the ports, because they are not automated right now. At NEXT, we’re building the first drayage solution in the world.”

 

The holidays are a big boon to business. Shippers, carriers, dispatchers — all of us end up with almost more work than we can handle, to keep up with demand and the higher frequency and volume coming from all sorts of retail (and other) clients.

 

But in the midst of all this abundance, are some of us leaving money on the table?

 

Technology is always changing the way we do business. In terms of logistics, it’s never been easier to speed up administration and even delivery.

 

At the same time, it’s not as simple as “letting the computer do it”. In addition to having the right technological partners — with real experts behind the controls (*cough* NEXT Trucking *cough*) — the savvy shipper/carrier/dispatcher needs to adapt to the changing marketplace.

 

Here are some tips on how to do that this holiday season. Considering or implementing just a few of them can help you further optimize your business and attract every available dollar in the coming weeks.

 

Be prepared for inventory management slowdowns

 

Many of the inventory management issues that can often crop up during the holidays may be outside your control. The more you can help overstressed warehouse and fulfillment staff, or other freight partners, the more you’re be appreciated and looked to in the future as a problem solver. Short sales windows, high demand, and sometimes long vendor lead times can compound this problem. Consider: Given this problem, how can you be part of the solution?

 

Remember that all business is customer service

 

Loyalty and long-term relationships arrive when you and your business prove that you care about your part in the shipping process — imagine how true this could be if you prove yourself helpful, dependable, and cool-under-pressure during the holiday crunch?

 

Fair or not, it can take just one bad experience to severely damage your industry reputation. Everyone gets exhausted during the holidays, and sometimes mistakes are made. You don’t have to be perfect, but you do want to remain polite and respectful, and you want to continue to show that you’re ready to work together with partners.

 

Finally, the holidays are all about timing. What can you do on your end, to ensure that you can handle increased volume and remain on time? Can anything be planned ahead, that you wouldn’t normally do outside the holiday rush?

 

Use data to speed up, and to excel

 

While raw data itself can be useful on the highest level, these days there are also so many specific means by which to analyze your markets, routes, and the results of your work. When was the last time you looked into incorporating a new analytics tool, to help teach you something new about your business? Is there some data-collection solution you can turn to now, to provide information that can help you optimize for next year’s holiday rush? Are you researching the holiday market from year to year, so that you can compare your capabilities to competitors — or use your stats as a selling point to customers?

 

Keep up with the times, or risk becoming obsolete

 

There’s a reason we started NEXT Trucking. We saw an opportunity to help people like you get freight to more places, faster, and in a way that helps everyone improve efficiency and save time and money (that can be reinvested elsewhere, incidentally).

 

With our app, you can:

• Schedule shipments via a network of +15,000 carriers
• Track shipments in real time
• Guarantee capacity
• Speed up cash flow
• (and more).

 

All this can be done from the smartphone you already carry. We’re here for you all the time — but especially during the mad dash of the holiday season.

 

Check that you’re ready, and get ahead if you can

 

Have you done as much prep as you could do ahead of time, to position yourself to absorb the rush? What could be planned that you might not have thought of already? Are you adequately staffed? If you aren’t, do you have a ready pipeline of additional workers to ensure your shipments don’t fall behind? Is your truck or fleet ready for harsher weather and more traffic? How strong are your lines of communication, between all parties responsible for the delivery of your work?

 

Speaking of communication, get started now (if you haven’t already)

 

With all of the above and below to consider, it can be easy to forget that we’re all human beings with real physical and emotional needs — including the needs to be appreciated and to be kept motivated. A little bit of pre-communication about the coming rush, to repeat information (so that it sticks) but also to help rally the troops, might seem unnecessary. But a strategy like this can go a long way towards keeping up morale when things get busy and exhaustion starts to set in.

 

Keep your calendar up-to-date, and know the trends

 

Do you know the holiday schedules for your partners, for vendors, and any other organizations you might encounter this season? Black Friday and Cyber Monday usually extend for a week or more, these days.

 

On a similar note, peak holiday shopping times (and thus much of holiday business) are actually somewhat predictable. Patterns often mimic last year’s numbers, and there’s more consistency from week to week than you might imagine. How might you exploit this predictability to get ahead this year?

 

Automate, automate, update

 

Automation is the name of the game these days. In addition to what’s offered by NEXT, what else might you do to stay nimble, and pivot quickly, when plans change and planned strategies inevitably run out of road. Are your devices updated, secure, and in working order?

 

In Conclusion

 

Finally, remember that it can be a good thing to run out of inventory, or to take on new loads or explore new opportunities, at a time wherein partner organizations and customers need as much help as they can get.

 

Once again, optimization becomes a process of visualization, planning, and positioning yourself as a problem solver, and as a provider of dependable service.

 

Happy Trucking Holidays! Good luck, and safe driving.