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2015

 

As progress is made in the development of driverless cars and trucks, one must wonder about their potential impact on the trucking industry. Although it would be years—if ever—before driverless trucks are a possibility, so called “limited self-driving automation” may be used to combat the ongoing driver shortage.

 

The National Highway Traffic Safety Administration defines different levels of automation. Level 4 would be a full self-driving vehicle, requiring no driver control other than to input the destination. The types of trucks that have been demonstrated so far are Level 3, or limited self-driving automation, which allows the driver to cede control of all safety-critical functions under certain conditions. The driver must be available to take back control of the truck when needed.

 

For example, in May, Daimler Trucks North America demonstrated the capabilities of its new Freightliner Inspiration Truck. It is equipped with Daimler’s Highway Pilot technology, which includes radar and a stereo camera, in addition to steering and cruise control systems available in other Daimler vehicles. When the driver selects the Highway Pilot feature, the truck will adapt to the speed of nearby vehicles and maintain a regular distance from the car in front. Although the truck won’t be able to change lanes while the automated pilot is activated, it can steer itself in case of a bend in the road. The truck’s human driver is still needed to perform tasks, such as exiting the highway, driving on smaller roads and taking control in case of bad weather or an emergency.

 

Mercedes-Benz and Peterbilt have developed similar technology as well. It’s important to note that—for now, anyway—a driver is always behind the wheel of these vehicles.

 

Such technology may play a role in addressing the ongoing driver shortage, which is expected to worsen. HireRight’s Transportation Spotlight 2015 report found that:

 

  • Projections by the U.S. Bureau of Labor Statistics expect compounded annual growth in employment for heavy and tractor-trailer truck drivers will reach 11.3 percent between 2012 and 2022;
  • The American Trucking Association estimates an additional 240,000 new truck drivers will be needed by 2023;
  • Trucking is disproportionately dependent on an aging employees 45 years of age and older; and 
  • Fewer young people consider blue collar careers.

 

However, as a recent HDT Heavy Duty Trucking article explains, even the use of limited self-driving automation may help address those factors by improving drivers’ quality of life, making the job easier, and then there’s a technological “cool” factor. Indeed, the use of these vehicle systems may help reduce driving stress, cut the amount of monotonous time periods on long trips, and have a positive effect on driver health—all of which may make the profession more appealing.

 

“If we can give that environment to a young driver, where they can connect to the world outside on their iPad while going down the road, it can be used to attract young drivers,” Sandeep Kar, global director of automotive and transportation research for Frost & Sullivan, says in the article.

 

Finally, if existing truck drivers become more productive and efficient, it may be another means to address the driver shortage because drivers would feel more important, and therefore value their jobs more. One example might be the possibility of letting a driver handle some back office applications or some sort of connectivity related activity—such as locating a backhaul, Kar says in the HDT article.

 

What are your thoughts on limited self-driving trucks? Do you think their use would help ease the driver shortage? For that matter, are you prepared to see 18-wheelers on the highway with a driver reading a magazine or using a tablet?

 

 

An open letter that warns of a “military artificial intelligence arms race” and calls for a ban on “offensive autonomous weapons” sounds—at first—like something from a summer blockbuster movie. However, the list of those who signed the letter reads like a Who’s Who list of artificial intelligence (AI) experts and leading researchers, which conveys the seriousness of the topic.

 

The letter, presented yesterday at the International Joint Conference on Artificial Intelligence in Buenos Aires, Argentina, was signed by Tesla’s Elon Musk, Apple co-founder Steve Wozniak, Google DeepMind chief executive Demis Hassabis and professor Stephen Hawking along with 1,000 notable AI and robotics researchers.

 

“AI technology has reached a point where the deployment of [autonomous weapons] is—practically, if not legally—feasible within years, not decades, and the stakes are high: autonomous weapons have been described as the third revolution in warfare, after gunpowder and nuclear arms,” the letter notes.

 

The issue, the letter explains, is that if one military power starts developing systems capable of selecting targets and operating autonomously without direct human control, it would lead to an arms race similar to the one for the atom bomb. Unlike nuclear weapons, however, autonomous weapons do not require “costly or hard-to-obtain raw materials, so they will become ubiquitous and cheap for all significant military powers to mass-produce,” the letter states.

 

“Autonomous weapons are ideal for tasks such as assassinations, destabilizing nations, subduing populations and selectively killing a particular ethnic group,” the letter notes. “We therefore believe that a military AI arms race would not be beneficial for humanity.”

 

All of this isn’t to say the letter signers are against AI, they are just against autonomous weapons beyond meaningful human control. Indeed, they explain that most chemists and biologists have no interest in building chemical or biological weapons; likewise most AI researchers have no interest in building AI weapons. They also don’t want others to tarnish the field by doing so because it may in turn lead to a major public backlash against AI that curtails its future societal benefits. Indeed, chemists and biologists have broadly supported international agreements that have successfully prohibited chemical and biological weapons, the letter notes, just as most physicists supported the treaties banning space-based nuclear weapons and blinding laser weapons.

 

This isn’t the first time potential applications for AI have proven worrisome, or that the letter signers urged a cautious approach be taken. Earlier this year, many of the letter signers had signed another open letter, titled, “Research Priorities for Robust and Beneficial Artificial Intelligence: an Open Letter.” That letter explains that, for the last 20 years or so, AI research  focused on the problems surrounding the construction of intelligent agents—systems that perceive and act in some environment. In this context, “intelligence” is related to statistical and economic notions of rationality, or the ability to make good decisions, plans or inferences. The adoption of probabilistic and decision-theoretic representations and statistical learning methods has led to a large degree of integration and cross-fertilization among AI, machine learning, statistics, control theory, neuroscience and other fields, the letter notes.

 

As AI research continues, it now seems likely its impact on society will correspondingly increase, and that the potential benefits are significant. On the other hand, in the letter last winter, the authors did caution that, due to the great potential of AI, it is important to research how to reap its benefits while avoiding potential pitfalls. More to the point, they wrote, “We recommend expanded research aimed at ensuring that increasingly capable AI systems are robust and beneficial: our AI systems must do what we want them to do.”

 

I can see significant potential for AI in fields ranging from supply chain management to medical research. Considering its potential, however, there obviously is a demand for what the AI researchers call “meaningful human control.”

 

What are your thoughts on both AI applications and meaningful human control?

 

 

A lack of skilled workers is a problem for many countries around the world—although some are working to address the situation. India, for instance, recently announced a new national skills training initiative. The U.S. is also taking significant steps, such as creating an apprenticeship program based on a successful program in Switzerland.

 

Indian corporations and industry have often cited unskilled labor as a considerable hurdle to filling existing jobs, so it comes as little surprise that the country’s government is working to address the obstacle. Indian Prime Minister Narendra Modi recently launched a program to offer skills training to more than 400 million Indians over the next seven years, “to make India the world’s human resource capital,” an Agence France-Presse article reports. The program will use the existing network of approximately 12,000 industrial training institutes along with decommissioned railway carriages as mobile-makeshift classrooms for remote areas.

 

I was more interested to see that the U.S. Department of Labor (DOL) is planning to establish an apprenticeship program based on the Swiss vocational education model as a means to fill the skills gap. The U.S. and Switzerland recently signed a Joint Declaration of Intent, to “provide a framework for the two countries to cooperate in such areas as work-based training, curriculum development, credential recognition, pathways to career development and the expansion of programs into new industry sectors,” the Commerce Department announced.

 

In Switzerland, students as young as 15 sign three- or four-year contracts with an employer’s apprenticeship program, which pays them as they learn skills, according to Martin Dahinden, Swiss ambassador to the U.S., a Society for Human Resource Management article reports. Two-thirds of 16-year-olds in Switzerland choose to start their careers via an apprenticeship as they attend school. After completing an apprenticeship, students may pursue other career paths, join another employer or attend college.

 

“The Swiss system is a combination of practical learning and classroom training,” Dahinden says. “The whole system is, to a large extent, business-driven. The private sector has an important role to play by providing practical training.”

 

Also at the Commerce Department’s joint signing with Switzerland, 10 Swiss companies—including Burkhardt Compression, Mercuria Energy and ABB—announced plans for new apprenticeship programs in the U.S. Seven others—including Daetwyler Group, Nestle and Pilatus Aircraft—announced they would expand existing apprenticeship programs in the U.S.

 

There are challenges in efforts to make apprenticeships an attractive alternative in the U.S. Perhaps the most pressing is to change the perception that apprenticeships are for jobs on a “dirty” manufacturing floor or that they are only for students who failed to go to college.

 

Apprenticeship in this country has been undervalued and underused, and often limited to construction and trades, says Eric M. Seleznow, deputy assistant secretary of the DOL’s Employment and Training Administration, the Society for Human Resource Management article reports. However, in Switzerland, apprenticeships produce highly skilled employees for an expansive range of occupations, including those in the information technology, advanced manufacturing and health care fields, as well as in traditional trades and crafts, he says.

 

I am in favor of apprenticeships and applaud efforts to create and promote such initiatives. However, I also think there is a wide-spread misperception about the nature of today’s advanced manufacturing. It certainly seems that to change peoples’ perceptions, both students and parents must be addressed because, in many cases, it’s the parents who are turned off by the manufacturing industry’s outdated image and are set on sending their children to college.

 

What are your thoughts? Do you see a need for both more apprenticeships and efforts to change perceptions about manufacturing?

 

 

In disturbing news, two computer-security researchers demonstrated they can take control of a moving Jeep Cherokee using the vehicle’s wireless communications system. The cyberattack demonstration comes amid growing concerns over just how susceptible U.S. automobiles really are to hackers taking control of vehicles or accessing motorists’ private information.

 

The two researchers, Charlie Miller, a Twitter employee, and Chris Valasek, a director at security firm IOActive, demonstrated in an article and video published in Wired magazine how they can wirelessly access a vehicle’s systems, a Wall Street Journal article reports. The two have kept some of the flaws they uncovered to themselves to prevent copy cats from taking action. However, they do show in a video that they can effectively disengage a car’s transmission or, when it’s moving at slower speeds, its brakes.

 

The New York Times reports Miller and Valasek plan to demonstrate at the annual Black Hat and Def Con hacking conferences in Las Vegas next month how, after two years of research, they also discovered a way to control hundreds of thousands of vehicles remotely.

 

Interestingly, Miller defends releasing the information, arguing he is improving auto safety by drawing attention to the issue.

 

“I’ve done a lot of research, but this is the first time I’ve been truly freaked out,” Miller said in a phone interview with The Wall Street Journal. “When I could hack into a car in Nebraska driving down the freeway, I had that feeling, ‘I shouldn’t be able to do this.’”

 

In the meantime, Fiat Chrysler, the Jeep manufacturer, has reportedly been in contact with the hackers for months, and released a software patch last week to fix the security flaw. Consumers must either take their vehicle to a dealership or use a USB stick to obtain the update.

 

This isn’t the first time the issue of hacking connected cars has come under scrutiny, however. Last winter, in light of studies demonstrating how hackers can infiltrate vehicles to gain control of steering, braking and other functions, staff for Sen. Edward Markey (D., Mass.) queried more than a dozen auto manufacturers. What they found, is that almost all the cars on the market today are vulnerable to “hacking or privacy intrusions” while most automobile manufacturers are unaware of—or unable to report on—past hacking incidents, says Sen. Markey in his office’s resulting report.

 

Senators Markey and Richard Blumenthal (D., Conn.) on Tuesday introduced legislation that would require NHTSA officials and the Federal Trade Commission to develop standards for securing vehicles and protecting consumers’ privacy, The Wall Street Journal article reports. The legislation would also create a “cyber dashboard” ratings system to inform consumers how well a vehicle protects against hackers.

 

“Drivers shouldn’t have to choose between being connected and being protected,” Sen. Markey said in a statement. “We need clear rules of the road that protect cars from hackers and American families from data trackers.”

 

I was also interested to see the Alliance of Automobile Manufacturers (AAM), a trade group that represents 12 major automakers, announce it’s creating an Information Sharing and Analysis Center (ISAC). This center, expected to be up and running later this year, will enable participating companies to swap cyber-security data and keep each other abreast of the latest hacking threats targeting vehicles. As the threat-sharing hub matures, AAM expects other companies related to vehicle manufactures—such as auto part suppliers, telecommunication providers and even tech companies—to join the hub.

 

“We’re acting now to get ahead of the curve,” says Robert Strassburger, vice president for vehicle safety at AAM. “The goal is to further enhance the industry’s on-going efforts to safeguard vehicle electronic systems and networks.”

 

Considering the potential from hackers gaining control of vehicles wirelessly, I think legislation requiring NHTSA officials and the Federal Trade Commission to develop standards for securing vehicles and protecting consumers’ privacy is a good call. I also think AAM’s center is a great idea, and look forward to learning more about it.

 

 

As a growing number of companies continue to develop driverless cars and even 18-wheel trucks, one must wonder where it’s safe to test them. One such facility is a new site at the University of Michigan.

 

Mcity, which opened Monday at the Ann Arbor campus, is a simulated city with building facades and sidewalk cafes. The city, housed on a 32-acre course, contains five miles of roadways, working traffic signals, street lights, construction cones, a tunnel, gravel roads and numerous obstructed views. There’s even a four-lane highway with entrance and exit ramps. The University of Michigan and the Michigan Department of Transportation pooled approximately $10 million to open the test facility so autonomous cars and advanced automotive technology may be tested and refined safely.

 

Road-testing at Mcity already has been going on for months. More than a dozen companies such as Ford, General Motors and Toyota, as well as suppliers including Denso and Verizon, will be able to sign up to test on the site in four-hour increments, according to an article in The Detroit News. UM faculty and engineering students will have access to the facility to work on projects and to collaborate with the industry.

 

What’s interesting is that although some firms are testing self-driving cars on roads on their own, Mcity will allow companies to repeat and retest scenarios the cars may experience on the road to ensure systems are working properly. The site was designed with curves and crests “so you can’t see what’s coming,” says Peter Sweatman, director of the UM Mobility Transformation Center, a public-private partnership of industry, government and academia that operates the facility. There currently are 48 industry sponsors of Mcity.

 

“Mcity has been designed specifically to be challenging,” says Sweatman in the article. “In the winter, some snow and ice will remain on the roadway to obscure lane lines and see how vehicles react. Sebastian, a mechatronic pedestrian, will step out into traffic to test whether the robot cars will sense him and hit the brakes to avoid running him down.”

 

Hideki Hada, general manager of integrated vehicle systems for the Toyota Technical Center, says Mcity will speed up Toyota’s development of prototype connected-car and automated-driving technology. While Toyota has a similar track in Japan, Mcity is just five minutes from Toyota’s Michigan tech facility, and will serve as a “nice playground for us,” Hada says in the article.

 

“This is a nice place to have a baseline understanding of the road signs and buildings so we can test improvement,” Hada says.

 

Automakers have said driverless cars may be on the road within five years. The market for autonomous technology will grow to $42 billion by 2025 and self-driving cars may account for a quarter of global auto sales by 2035, according to Boston Consulting Group, reports an article on Bloomberg Business. By 2017, semi-autonomous cars that operate in auto-pilot mode, park themselves and change lanes automatically will be available in “large numbers,” the firm notes.

 

“We all compete on a technology level,” Greg Stevens, global manager of Ford’s driver assistance and active safety research, says in the Bloomberg article. “But when it comes to things like regulatory approaches and legal approaches, that’s where you really want to come together and collaborate.”

 

I think Mcity is a great idea because it offers a place for automakers to safely test vehicles—as many times or for as long as is necessary. It’s also sure to improve collaboration among partners.

 

What are your thoughts about Mcity?

 

 

When the topic of cyber risk comes up, many people think of technology-based solutions. More importantly, however, consideration should be given to the role employees play in protecting against cyber threats.

 

This employee-focused approach must start with executives. That’s because lack of executive buy-in and board oversight could cause a company to miss the necessary focus and fail to make the required investment, says Ruby Sharma, a Principal at Ernst & Young LLP and with the EY Center for Board Matters, in a Zurich Insurance article that ran on Bloomberg Business. It’s the board’s responsibility to challenge management to ensure management is appropriately allocating resources to address cyber risks that are commensurate with the risk levels. Given that technology transcends and impacts all departments and corporate structures, boards should address whether management’s cyber-security plan has a cross-functional team involving business leaders of all key departments, says Sharma.

 

That type of enterprise-wide strategy for cyber-risk management also helps protect against another risk: placing the burden of cyber-risk management solely on technical experts, which is “a pitfall,” says John Scott, Chief Risk Officer, Global Corporate, Zurich. It’s important to understand that this is about people and behaviors, not just technology, he says.

 

“It’s being driven by a number of trends including the Internet of Everything and BYOD [bring your own device], which create more entry points that are vulnerable to attack; and cloud computing, where server farms are often co-located or connected in a way that creates systemic risk,” Scott says in the article. “A successful cyberattack on a key cloud provider could take down many businesses in many locations. All of that together changes the nature of risk, and is as good a reason as you need to realize that the cyber-risk management discussion needs to start at the board level.”

 

One of the benefits from an enterprise approach to managing cyber risks is it spreads the net of inclusion to embrace new ideas that might otherwise not be in the picture, says Tim Stapleton, Global Underwriting Manager, Professional & Management Liability, Zurich, and that helps reinforce the priority throughout the company.

 

“You need a number of functions involved in the process, and when that happens, different talent starts to take notice, from the CEO all the way down to the frontline employee,” says Stapleton. “It’s a combination of large and small taking an active role in working on behalf of corporate information security, not just the IT portion. It takes a broader approach to help reinforce the priority throughout a company.”

 

The weakest link is often employees and a lack of awareness of cyber risk. Consequently, it is vital to create awareness that begins with basic data privacy and security: identifying data owners, classifying data with the appropriate security classification and then treating that data with the appropriate level of security, the Zurich article notes. Furthermore, all employees must be aware of the different approaches cyber attackers employ—such as phishing attacks that dupe employees to download malware—and know what do to avoid systems being compromised.

 

Encouraging employees to help at an individual level can help people see firsthand the role they can play in managing cyber risks, says Zurich’s Jérôme Gossé, Head of Security & Privacy, Global Corporate in EMEA. They need to know they should never assume that things that don’t fall under their normal remit are someone else’s responsibility, because maybe everyone else thinks the same thing, he says. And in those cases, it often falls to someone who isn’t qualified to deal with all of the issues surrounding data privacy. On the other hand, if an employee follows up to see whose responsibility it is, and discovers no one is covering the issue, then they’ve identified a cyber risk and can alert the right people, he says.

 

What are your thoughts on cyber-risk management? Are all employees at your company engaged?

 

 

The $5.25 billion Panama Canal expansion project is now approximately 90 percent complete, and the Panama Canal Authority has begun filling the locks with water. As the project gets closer to completion, more questions arise about just what impact the expanded canal will have on shipping.

 

Last month, the Panama Canal Authority filled the canal’s Atlantic locks. Then management began pumping water into the locks on the Pacific side of the canal in preparation for about four months of tests and inspections.

 

The expansion project, which is expected to open to commercial traffic in April 2016, includes larger locks on both the Atlantic and Pacific sides of the 50-mile-long canal, as well as new access channels to accommodate larger post-Panamax ships. The new locks will work in parallel with the canal’s current 100-year-old locks, which will continue to handle the transit of smaller ships.

 

Rodolfo Sabonge, who worked for the canal authority for 30 years before retiring as executive vice president of planning and business development in 2013, said the main impetus for expansion was that the canal was reaching capacity, rather than just the need to handle big ships, a recent Miami Herald article reports. A study showed the canal would reach its capacity in 2011, but the global financial crisis and falling levels of trade “bought some time,” says Sabonge.

 

“Now the expansion has come just in time,” Sabonge says in the article. “The canal wasn’t going to be able to handle the number of ships.”

 

Work isn’t just being completed in Panama, however. Indeed, ports all along the Eastern Seaboard and Gulf Coast have been rushing to be big-ship ready so they can become major ports of call for post-Panamax ships. Port Miami is ahead in the race, as its port authority expects to have the port’s shipping channels dredged by August so it will have the deep water necessary to handle fully laden post-Panamax ships, the Herald reports.

 

Numerous other port authorities are investing millions to have ports dredged and widened so they too will be able to accommodate larger ships. It is the opinion of Sabonge, now president of Universidad del Caribe and a logistics consultant, that such efforts aren’t always the best course of action. At the end of the day, not every port should expand, he says in the Herald article. As long as ports are all competing with each other, it’s not going to benefit anyone, he says.

 

The problem, according to Sabonge, is that the canal itself “doesn’t create trade or demand.” That’s because expansion of the canal doesn’t necessarily mean more trade will follow, he says.

 

Interestingly, as was recently noted, Cuba recently overhauled, deepened and expanded the Port of Mariel as part of a plan to build a regional trading hub. The port has already been dredged to a depth of 60 feet to accommodate post-Panamax vessels, and it will feature a terminal with the capacity to receive three million containers a year. Port Mariel also will have a road and rail network that connects with existing highways to guarantee efficient handling of the additional traffic generated by the port expansion.

 

Jamaica’s Kingston port is better positioned for Caribbean trans-shipment because Port Mariel is too far out of the way, says Sabonge in the Herald article. But if commercial ties between the U.S. and Cuba really do open up, Cuba could be an important location for near-shoring, he believes, with manufacturers leveraging a low-cost, well-educated labor force and setting up plants on the island to feed U.S. demand.

 

“If that happens, Cuba will be the best near-sourcing possible,” says Sabonge. “That gives Florida a great opportunity to become a base of all that activity.”

 

What are your thoughts on how an expanded Panama Canal will impact shipping? Also, do you envision Cuba becoming a viable near-shoring location?

 

Growing congestion has an impact on logistics across the U.S. Travel is slowing because highways and bridges are in need of repair; overburdened air-traffic control struggles to manage increasingly crowded skies; and port congestion is growing. New super-size container ships which will take longer to unload than older, smaller ships will only make matters worse.

 

One consequence for supply chains is that logistics costs are rising. Secondly, many companies struggle when demand changes quickly. Writing in Harvard Business Review last month, George Stalk, a senior adviser and fellow at Boston Consulting Group and a senior partner at Banyan Family Business Advisors, and Petros Paranikas, a partner and managing director of the Boston Consulting Group, explain, given the lag time before changes in demand are actually felt by different players throughout the chain, their effects are amplified, which may lead to inventory shortages or pile-ups. Then, companies tend to overcompensate by stopping or increasing production lines, and inventory levels can fluctuate wildly. This is the “whipsaw” effect, and congestion can intensify the situation, they explain.

 

The associated costs can be significant. Lost profits from a stockout equal the gross margin of a product—generally in the range of 20 percent to 50 percent, Stalk and Paranikas write. Product overstocks result in discounted prices, which are usually about half to two-thirds of the gross margin, they note.

 

The bottom line is that companies must redesign their supply chains or become victims of the direct and indirect costs of increasing congestion, Stalk and Paranikas believe. However, they explain, companies can minimize the business impact of congestion—and gain a strategic advantage over less-prepared competitors—by enhancing their supply-chain performance in several critical ways.

 

The first is to improve process efficiency. Speeding up value delivery can result in remarkable performance improvements. For instance, a 25 percent reduction in the time needed to deliver a product or service can double the productivity of labor and of working capital, Stalk and Paranikas write.

 

It’s also vital to improve information flows. Supply-chain speed and agility sharply increase when information is shared across the network. Walmart’s Retail Link offers an electronic bridge to the retailer’s suppliers, providing data on sales and inventory levels, and allowing them to download purchase orders, Stalk and Paranikas explain. This close integration gives suppliers a better sense of true demand, which can reduce the effects of congestion throughout the supply chain.

 

The ability to reduce variability can have a significant impact. Much supply-chain variability is self-inflicted, and comes from inadequately informed planning and needless complexity in processes, products, and portfolios, Stalk and Paranikas write. After improving process efficiency, companies should strive to shorten and simplify their supply chains by moving away from high-volume, world-scale plants that make just a few products to smaller plants that make a wider range of products closer to local markets. Increases in unit-production costs are often offset by lower logistics costs, faster replenishment cycles and fewer stockouts and overstocks, the authors believe.

 

Finally, companies should re-evaluate transportation methods. One tactical approach is to make more use of air freight. Air cargo costs per ton are four to six times greater than on-ocean shipping costs, which account for 0.5 percent to two percent of the shelf price of most products, according to Stalk and Paranikas. For the right products—those with high margins, a limited shelf life or short product life cycles such as fashion and technology items—the added costs of air freight are more than offset by the positive impact on profits of fewer stockouts and overstocks, the authors note.

 

Such tactics and strategies for improving supply-chain performance may lead to increased market share, reduced costs and dramatically improved profitability, the authors note. Consequently, companies which act now will be better prepared to seize opportunities as other companies struggle with logistics congestion.

 

What are your thoughts on logistics congestion? Do you see congestion getting worse? If so, is your company rethinking its approach to logistics?