Last weekend I walked into one of my favourite Men’s stores in a local mall, Yorkdale Shopping Centre in Toronto, to arrange for a pair of pants to be mended.  The retailer, Harry Rosen, asked me to stick around for a few minutes while they did the repair.  After looking at their display of Armani ties, I walked across the hall into the Hudson’s Bay store.  Like many men, I don’t shop for clothes too often and when I do, I go to a select group of stores, in a very focused way, to buy what I need.

After passing the cosmetics counters that have always been across the hall from Harry’s, I had quite a shock.  In fact, I would say that the HBC store was unrecognizable to me.  The previously rather bland retail environment was replaced with a dazzling array of designer fashions.  The men’s department that had always been on the main floor was nowhere to be found.  This caused me to reflect on the many changes taking place in the retail sector.

As I walked through the mall, I saw a number of well-known American retailers that have found their way to Canada.  The list now includes Victoria’s Secret (also just next to Harry’s), American Eagle (a few doors away), J Crew and William Sonoma.  Another one of my preferred men’s shops (Brooks Brothers) has also landed in downtown Toronto.  Canada has been discovered, not by Christopher Columbus, but by Target Stores and Nordstrom, that have announced their intentions to head north. 

Canadian retailers have been preparing for the invasion for some time.  Clearly, the HBC makeover is directed at blunting the attack from Nordstrom, Target and others.  Holt Renfrew, one of Canada’s leading luxury retailers, that is affiliated with Lord and Taylor in the United States, has announced its intention to open a chain of HR2 stores.  The stores will feature unique merchandise sourced from many of the same designers that supply Holt Renfrew, but at a lower price point.  While Holt Renfrew executives have denied the suggestion, the stores will likely resemble Barney’s New York’s less expensive Co-Op chain or Neiman-Marcus’s lower-priced Cusp stores. 

Not to be outdone, one of Canada’s major furniture retailers, Leon’s Furniture, bought The Brick this week to gain efficiencies and economies of scale and to more effectively respond to a slowing housing industry.  They also hope to compete more successfully against Target Stores.

Pierre Berton, the late, famous Canadian author noted in his book, “The Last Spike,” that CP Rail has held a respected place in the country’s history.  He wrote that “no other private company, with the single exception of Hudson’s Bay Company, has had such an influence on the destinies of the nation.” For most of the past 15 years, CP Rail faced stiff competition from CN Rail as Paul Tellier and Hunter Harrison led the company’s move from a bloated government run enterprise to a highly profitable public company.  In fact CN’s operating ratio of 61.3 is not only the best among the major North American railroads, it is one of the best of any company in the transportation industry.

The fact that CP Rail lagged so far behind CN Rail and the other class 1 railways in North America led the activist investor Bill Ackman, of Pershing Square Capital, to launch his “palace revolt” proxy battle that resulted in the replacement of CP’s former President with Hunter Harrison, whom he brought out of retirement to drive the railway’s profit improvement.

As we pass through the last quarter of this year, Canada’s two largest railroads are heading down separate tracks.  With an operating ratio is the low 80’s, Mr. Harrison has embarked on a series of actions to reduce costs through improved asset utilization.  This is another way of saying that CP Rail is planning to move its equipment more quickly and efficiently, to become Canada’s second “precision” railroad.   It is seeking to accomplish this by undertaking a series of initiatives.  These include:

• Building trains at CP’s intermodal terminal in Vancouver with blocks of cars for long haul destinations. This reduces stops and streamlines connections.
• Increasing average train lengths to 7,000 to 12,000 feet
• Speeding up the fueling of trains
• Improving daily scheduling
• Investing $1.2 billion in 2012 and $1 billion in 2013 on key infrastructure projects
• Working with customers at both ends to improve coordination

The net result of these changes is that CP Rail now provides 4 day transit times between Vancouver and Chicago and Toronto.  These changes represent half of the transcontinental trains that CP launches daily across its network.  Mr. Harrison is not expecting an overnight drop in the company’s operating ratio.  He told Bloomberg News that he is targeting about 65 percent in the next four years.

Shippers appear to be taking notice of improved service on both major Canadian railways. 

Mercifully, the U.S. election is in its final days.  As a Canadian with friends, family, colleagues and clients in the United States, it has been distressing to watch the talk shows, debates and the steady bombardment of election ads on television. 

There is no doubt that Mitt Romney and Barrack Obama are two very intelligent, gifted people.  Their respective parties each have a vague plan to restore America to its rightful place as the leader of the free world.  Regrettably, neither party has provided a detailed substantive roadmap on how they would reduce the deficit and put Americans back to work.  The reasons for this are simple.  Every policy statement offered by one party would be parsed and ripped apart by the other party.  There is safety in being vague.  Even worse, the Republican plan, if you can really call it a plan, would likely increase the size of the U.S. deficit and be of most benefit to affluent Americans, those who are least in need of more financial perks.

Also troubling is the fact that the party leaders and pundits cannot acknowledge any value in their opponent’s program.  Each party demonizes the other with misstatements, half-truths and exaggerations that make the level of political discourse very negative and unpleasant.  America is very a polarized and divided country.  Almost every poll shows the two leaders in a virtual dead heat.  Millions of dollars are being spent in a handful of “swing” states and in a select group of counties where a small number of so-called undecided voters control the fate of the election.  After four and a half hours of debates, hundreds of hours of chatter on television and radio and millions of words in the social media, is there anyone truly “undecided” at this late stage? 

The election appears to be based on two polarized versions of the past four years.  If one believes that President Obama was faced with the worst financial crisis since the Great Depression and that he did everything possible to stimulate jobs, protect U.S. autoworkers, provide universal health care and keep America safe, you will vote for the President.  If you buy into the scenario that President Obama and the Democrats could have done a better job of stewarding the economy during this period, that employment would have been higher and gas prices lower under a Republican administration, that the social policies proposed by the Democrats are too radical, that universal health care is too rich for America and that it is time for a change, you will vote Republican.  The few undecided voters ultimately have to accept one of these distorted views of reality.  Neither one of these scenarios is an accurate reflection of the current state of America. 

Fortunately or unfortunately, I live in Canada and have to deal with our own very troubled political realities.  Sadly, we lost one of our best political leaders to illness and lost one of our major political parties to a series of inept leaders and policies.  The son of former Prime Minister Pierre Trudeau, a young and inexperienced man, may end up becoming its leader and face the very difficult task of resurrecting the fortunes of the Liberal party against a very crafty Stephen Harper, Canada’s current Prime Minister - -  a very tall order.   We have our own problems in Canada.   

During my 30 years in the transportation business, I have had the privilege of leading some great organizations.  Like everyone else, I have had my share of successes and disappointments.  During this period I have also had the opportunity to work with and study a variety of CEOs.  From experience and observation, I have identified a number of characteristics for those CEOs I would deem as top performers.  Here is my list.

     1. Passion for the Business

Top CEO’s have a passion for the business.  They are fully engaged in the operation and actively seek to improve their companies on an ongoing basis.

     2. Become personally engaged with the company’s top clients

The best CEOs get out from behind their desks to meet their clients and form strong bonds with them.  They take a keen interest in their clients’ businesses.  They also seek to establish a personal rapport with their clients that extends beyond the office.  One of the best examples of staying close to a client’s business was demonstrated to me by a trucking company CEO who, several times a year, would take a tractor-trailer on the road to pick up and deliver loads for the company’s key customers so he would have an insight into the freight and its specific loading and unloading requirements. 

The 2012 Surface Transportation Summit held in Toronto last week attracted over 200 shippers, carriers and industry vendors.  The speakers and panelists discussed a wide ranging array of topics but one of the recurring themes was the need for shipper-carrier collaboration.

The Great Recession placed tremendous downward pressure on freight costs and freight rates.  The industry is still in a recovery mode.  Carlos Gomes, the Senior Economist from Scotiabank, the leadoff speaker at the Summit, expressed the view that the economies of North America will be in a period of slow growth for some time to come.  

On the other hand, Maximizing Profitability and Reducing Freight Costs remain the two top priorities for shippers in the 2012 Transportation Buying Trends Survey, as presented at the Summit by Lou Smyrlis, Editorial Director of the Business Information Group. The carrier executives who spoke talked about the need for freight rates to increase to maintain the viability of their businesses.  How do you reconcile these two disparate positions?

A number of shippers and carriers talked about the importance of communication and collaboration.  This collaboration is taking several forms.

Brian Springer, the VP of Transportation of Loblaw Companies discussed the value of providing a company’s core carriers with freight forecasts.  His company provides 6 month, 6 week and 24 hour forecasts of load expectations, thereby allowing his core carriers to better meet the Loblaw capacity requirements.  This approach is particularly important since a number of carriers talked about the requirement to control investments in capital, specifically tractors and trailers, until there is a quicker pace of economic improvement.

The increase in job creation in Canada over the past two months and the decline in the U.S. unemployment rate to 7.9 percent (that was announced on Friday), paint a picture of a North American economy on the mend.  John Larkin, transportation sector analyst with Stifel, Nicolaus & Company believes that America is in a flat, slow growth mode which is likely to continue. The natural tendency to grow faster than the 1-2% levels seen in recent quarters coming out of recession is dampened by a variety of factors, including the seemingly never ending financial woes in Europe, more tension on the Middle East, a slowing Chinese economy, high unemployment and low levels of labor participation in the US, and worries over the looming "fiscal cliff" approaching at year's end.

He noted that while retail sales numbers in general have looked reasonably strong, when backing out sales of gasoline and indexing for population growth and inflation, retail sales in the U.S. are right now just at levels seen in 1998 - hardly bullish for freight. Retail sales are still down 8.6% today from their adjusted peak seen all the way back in 2006, even though the number is up substantially more than the bottom in Q4 2008.

Larkin also indicated that sales growth at 10 of the largest US retailers was just 1.6% in Q2 - which exactly mirrored inflation, meaning real growth was flat. Housing markets appear to have turned the corner, but remain far from healthy. Recent increases in prices, building permits and home starts are from a low base.

A recent Statistics Canada report showed that Canada’s jobless rate rose to 7.4 percent, a seven month high.  Maththieu Arseneau, senior economist at National Bank Financial in Montreal noted in an interview with the Globe & mail that the current pace of hiring will likely ease.  Mr. Arseneau highlighted a slowing construction industry, global pressures that are impacting manufacturing and a trimming of public sector budgets.  Two major Canadian retailers, Hudson’s  Bay Co. and Shoppers Drug Mart announced plans to cut 210 and 80 jobs respectively, to trim costs in response to competitive (e.g. entry of target into Canada) and regulatory changes. 

How is this all playing out with the transportation industry?

For over two decades the University of Tennessee has been conducting its Masters in Logistics research study.  This year the study was undertaken in partnership with Con-way Inc., Ernst & Young, and Logistics Management.  The U.S. based participants accounted for an estimated $30.1 billion in domestic transportation expenditures and over $20.5 billion in international transportation.  Some 1,370 domestic and global logistics, transportation, and supply chain management professionals participated in the study.  A summary of the report appears in the current issue of Logistics Management and is the basis of this blog.

The Masters of Logistics, those companies with annual freight spend in excess of $3 billion, represented 27.8 percent of the study participants. Medium-sized firms, with between $500 million and $3 billion in annual revenue, were 20.6 percent of respondents. The majority of respondents (51.6 percent) were smaller firms with reported annual revenue less than $500 million.  The study participants came from a broad array of industries.

 The results identify the emergence of an idea advocated for over a decade, and one which is being put into place by the Masters of Logistics: Use logistics and transportation services to differentiate yourself in the marketplace. As the study suggests, being able to deliver differentiated service is not possible without a value-creating partnership between the shipper and its strategic carriers; in turn, this has created a unique balance of power between the two parties.

Overall transportation spending as a percent of sales increased from 2011 to 2012. The data showed that companies that spent more than 5 percent of sales on domestic transportation increased year-over-year, rising from 21.2 percent to 26.7 percent in 2012.  The key reason is the change in strategic direction for many companies. Following several years of intense cost cutting, particularly in transportation spending, the 2012 study results point towards companies shifting some of their focus to maximizing profitability and asset utilization. In the meantime, the percentage of respondents who reported that their primary objective is reducing costs has shrunk each of the past three years—findings that reveal that shippers again believe that you have to “spend money to make money”.

Being able to rapidly respond to changing customer requirements is becoming increasingly critical for both shippers and carriers. Today, more than ever, transportation plays a key role in helping companies attain that necessary level of responsiveness. The study indicates that some 71.6 percent of respondents are either capable or highly capable of adjusting transportation operations in response to changing conditions—and this ability to alter and adapt is greater for transportation than for logistics operations.  ‘Total Delivered Cost” is becoming the value creation metric and competitive differentiator among carriers.

In reviewing the 11^th annual shippers choice awards in the current issue of Canadian Transportation & Logistics, I noted with interest that of the hundreds of carriers rated in the survey, only 57 were able to surpass the Benchmark of Excellence.  The magazine presents a number of KPIs (Key Performance Indicators) and lists the scores of the top ranked carriers, by sector (e.g. LTL, truckload etc.), along with the Benchmark scores.  Unfortunately, too many trucking companies are viewed as commodities and don’t measure up.  Being less positively viewed by shippers can make it difficult to achieve satisfactory pricing levels and as a by-product, satisfactory operating ratios.  The data highlights the importance of customer engagement, of being superior at meeting shippers’ needs.

Many companies bring their leadership and management teams together on a quarterly or annual basis to craft/update their budgets, strategies and business plans for the coming year.  In a recent McKinsey Quarterly report, prepared by consultants Tom French, Laura LaBerge and Paul Magill of McKinsey & Company, the writers suggest that many companies are fragmented in their approach to customer interaction and engagement.  The consultants offer a six step plan for superior customer engagement.

1. Hold a Customer Engagement Summit

They suggest that the leadership teams in companies should hold a “customer engagement summit”.  They argue that senior managers, from all departments of the company, should look beyond the basic interactions that customers have with various departments.  The meeting should focus on developing strategies to motivate customers to invest in a continuing relationship with the company and its services.  In other words, companies should implement strategies that move shippers along the customer loyalty continuum.

      2. Focus on Three Factors

The writers outline three factors that should be addressed in formulating a customer engagement strategy.  First the company should construct a vision for how it wishes to build relationships with its customers.  Second, the company should craft an integrated and consistent strategy for interacting with customers across its various departments.  For a trucking company, the customer interactions with Sales, Customer Service, Dispatch and Claims should be in harmony.  Third there should be agreement on the components of the company’s customer engagement system that will be undertaken in-house or via its partners (e.g. beyond carriers, carrier partners, pick-up and delivery agents etc.).

For four years the U.S. has been in a slow motion economic recovery.  Unemployment remains chronically high with little sign of improvement.  Annual GDP growth is below 2 percent and is expected to remain at that level for some time.  This week, the U.S. Federal Reserve had to undertake its third quantitative easing initiative in the last few years, along with committing to holding interests low until 2015, to try to get the economy untracked.    

The U.S. election is less than two months away.  While the two major political parties have very different views on a range of social issues, there should be some common ground on the economy.  The fact is that there is a desperate need to rapidly increase economic growth and reduce unemployment.

While I am not a trained economist, it seems to me that there are a set of economic paths that America needs to embark on to right the ship.  It would certainly help if government and industry leaders had a shared vision of the paths that need to be taken.  Here are a few thoughts.

Both Presidential nominees talk in lofty terms about an American manufacturing renaissance.  Governor Romney has talked about creating 12 million new jobs over the next four years which would far exceed the 80,000 to 100,000 jobs per month that are currently being created.  It is almost impossible to conceive how this large number could be achieved with a projected growth rate of 1.5 to 2.0 percent GDP growth. 

While this writer and others have written about an upswing, this year, in manufacturing jobs in the United States, the fact is that manufacturing has been in decline in the U.S. economy for three decades.  Over the past 12 years, U.S. manufacturers have cut 31 percent of their workforce, or nearly 6 million workers.  This should not imply that the U.S. should give up on manufacturing.  Rather, it suggests that industry and government should focus on those sectors where the U.S. has the best chance of succeeding and leading in the world. 

It is not a joke.  It is happening out there.  The fact that it is happening caused a tidal wave of comments on the LinkedIn “A Truckload, Trucking, Logistics, Supply Chain, 3PL, Distribution group” over the past week.  Here is a sample of what the group members had to say.

“I have asked for and gotten almost $4.00 per mile on loads from the Central Valley in California to Portland/Seattle. These are reefer loads, not dry, but that's a good rate...unless you know beforehand that IF you can find a load back out of that area you will be turned down for the load a lot of times if you want more than $0.89 per mile.  On that lane you’ve got to get your money going in...you won't get much out of there,” stated one trucker.

An Operations Manager at another trucker stated, “As someone who has been in this business a long time, I really don't see how $ 3.00 - $ 4.00 a mile rates would be considered greed. The cost associated with transportation - insurance , fuel , equipment, taxes, maintenance have all increased about 4- 5 times over what they were 25 years ago while the rates in most lanes have remained pretty much the same. Brokers are taking a bigger cut in most cases, not all.  Generally 8- 10%, used to be the norm”.

“I guess it depends on the load itself” stated a Transportation Planner at a Freight Agent. “Shorter miles equal higher rates. Some carriers are just plain greedy, but then some are working the negotiations, asking for higher rates knowing they will have to take less, but hoping to find a happy medium”.

A sales person/dispatcher at a logistics company provided these insights.  “See, these are longer miles between 950 miles to 1150 miles. . . I am all about paying a carrier a fair rate, offering more than the bigger brokers, but to pay $3-$4 per mile is outrageous . . .

Trade using surface transportation between the United States and its North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, was 6.6 percent higher in June 2012 than in June 2011, totaling $82.6 billion, unadjusted for inflation according to the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation. Adjusted for inflation and exchange rates, the June 2012 total was $61.0 billion in 2004 dollars, up 11.0 percent from June 2011.

BTS, a part of the Research and Innovative Technology Administration, reported that the June 2012 value of U.S. surface transportation trade with Canada and Mexico rose 11.4 percent from June 2008, seven months into the recession, and 62.8 percent from June 2009, at the end of the recession. 

The value of U.S. surface transportation trade with Canada and Mexico in June increased by 79.0 percent compared to June 2002, a period of 10 years. Imports in June were up 69.7 percent since June 2002, while exports were up 90.8 percent.  Surface transportation includes freight movements by truck, rail, pipeline, mail, Foreign Trade Zones, and vessel. In June, 87.7 percent of U.S. trade by value with Canada and Mexico moved via land, 8.3 percent moved by vessel, and 4.0 percent moved by air.

In June, the value of railed imports between the United States and Canada rose 16.6 percent to $6 billion and value of railed exports soared 25.5 percent to $3 billion. The value of railed imports between the United States and Mexico climbed 16.1 percent to $3.3 billion and value of railed exports increased 7.7 percent to $2.3 billion.  For the same month, the value of trucked imports between the United States and Canada rose 2 percent to $12 billion and value of trucked exports jumped 6.4 percent to $18 billion. The value of trucked imports between the United States and Mexico climbed 8.7 percent to 15.6 billion and value of trucked exports increased 9.6 percent to $11.8 billion.

The value of U.S. surface transportation trade with Canada and Mexico decreased 1.4 percent in June 2012 from May 2012.  It should be noted that truck imports and exports between the United States, Canada and Mexico declined between May and June 2012, while rail imports and exports continue to be strong.  Month-to-month changes can be affected by seasonal variations and other factors.

A well-developed sales pipeline is a key component of any well managed sales management system.  When properly utilized, the tool is an invaluable resource in measuring the number of quality leads in the system, the true number and dollar value of prospects versus suspects, the number of proposals submitted, the number of verbal commitments and the number and dollar value of signed deals. It is extremely useful in evaluating the effectiveness of individual sales reps and of the sales team as a whole.

As the utility of social media becomes well understood, skilled practitioners of sales management systems are beginning to take advantage of its value.  Social media can play a key role in every facet of sales pipeline management.

Lead Generation

Individuals and companies that are active social media participants are likely to generate leads, some anonymous, from individuals who visit your web site, participate in a LinkedIn group,  respond to a question on LinkedIn or who follow your tweets.  The key is to set a plan in motion to provide quality thought leadership on a consistent basis, to make useful white papers and other material available “free of charge” and to create a process of generating and identifying quality sales leads. 

Turning Suspects into Prospects

Many of us receive information from multiple news sources on a daily basis.  You may start your day with the morning newspaper in hard copy or on your iPad, Kindle or Kobo.  If you are in the transportation industry, throughout the day you are likely receiving trade magazines in hard copy and/or digital form, news feeds and white papers from various sources, updates from your LinkedIn groups, Twitter feeds, Facebook updates and of course dozens or even hundreds of e mails and text messages.    Of course many of us have interests beyond freight transportation that may include Business, Investing, Sports, Technology, the Arts and/or a range of other topics.  Trying to stay abreast of the news in these areas can often result in another set of publications and news feeds.   The management of information can be quite a challenge.

Using software developed by paper.li, I have tried to make life easier for transportation professionals.  Dan’s Transportation Newspaper is published daily, 7 days a week, 52 weeks a year.  The primary focus of the paper is freight transportation.  Stories on truck, rail, air and ocean shipping are included.  Since many of us are keen students of Business and Sports fans, the scope of the newspaper includes important stories in these areas.

The freight sections include stories from the Journal of Commerce, Transport Topics, American Shipper, Logistics Management and from other American and Canadian sources.  The Business section contains features from the Wall Street Journal, Harvard Business Review, ISM, The Economist, Report on Business and other leading publications.  The Sports segment provides articles on the NFL, NHL, MLB, NBA and the CFL.  There are 25 major news feeds that supply articles to the newspaper on a daily basis.

Busy transportation professionals can now obtain the latest news in all of these areas in one daily newspaper.  The good news is that there is no charge. 

Here is a link to the paper.  http://paper.li/DanGoodwill/1342211466?utm_source=subscription&utm_medium=email&utm_campaign=paper_sub

Freight costs often represent a significant percent of a manufacturer or retailer’s expenses.   While many companies have highly qualified CFOs and VPs of Logistics or Transportation, the management of freight costs is often sub-optimized.  This appears to be a result of a lack of collaboration between these executives with each having a different set of metrics and perspectives.  Here is my take on why this is happening.

 Business Strategy versus Transportation Strategy

CFOs are focused on the strategic direction of the business, on earnings, cash flow and return on invested capital.  They are under pressure to reduce the amount of inventory tied up in supply chains. To a CFO, lean inventory means “reduction in working capital tied up in inventory.” 

VPs of Logistics and Transportation are preoccupied with efficient supply chains.  Leaner inventories mean smaller production lots and faster transportation, which can command premium rates since they preclude the use of cheaper, longer-transit modes, and may even require paying a premium for expedited freight. On the inbound side, this can cause plant or production line shut-downs due to lack of raw material or parts. On the outbound side, it can lead to empty shelves or the loss of a customer and its associated revenue stream.

Inventory is a component of working capital. Investors look at the levels of capital tied up in the supply chain – the lower the better. However, if you take your inventory, and therefore working capital, too low, your profit margin may suffer.

American Shipper conducted their annual shipper survey earlier this year to determine Best Practices in Freight Transportation Procurement.  The magazine contacted 275 manufacturers and retailers in May of 2012.  The results were published on June 27, 2012. 

They reveal some interesting changes in shipper behavior.  In terms of percentage increase in freight spend, 38% of the respondents indicated that their spend increased by more than 5%.  This compares with 58% in 2011.  Thirty-four percent of the same experienced an increase of less than 5%.  This compares with 17% in the previous year.  Only 11% experienced a decrease in spend.  In 2011, the comparable figure was 16 percent.

The trends for contract freight were similar.  In 2012, 21% of the same sample experienced an increase of over 5% in contracted freight rates.  In 2011, the comparable figure was 40%, a significant decline.  Thirty-seven percent negotiated an increase of less than 5%.  This compares with a figure of 31% in 2011.  Twenty-four percent of the respondents experienced no increase in rates.  In 2011, the figure was 10%.  Clearly there has been a dampening of rate increases in 2012.

The survey respondents were asked to rank the importance of Price, Service and Risk in their freight rate negotiations.  Fifty-eight percent of respondents ranked Price as number one in 2012 as compared to 48% in 2011.  The comparable figures for Service were 42% in 2012 versus 49% in 2011.  No respondents ranked Risk as number one in 2012 as compared to 3% in 2011.

The survey analyzed the cost savings advantages of negotiating freight rates on a centralized basis versus on a decentralized (e.g. multi-plant, multi-divisional) basis.  Thirty percent of decentralized companies experienced an increase of 5% or more as compared to 15% of those companies that negotiate on a centralized basis.  Forty-two percent of the centralized respondents negotiated no increase as compared to 31% of the decentralized group.  Eighteen percent of the centralized group negotiated rate decreases as compared to 20% of the decentralized shippers. 

The economic forecasts for the second half of this year do not look too promising.  While there are a few positive signs in the United States (e.g. auto sales, new home construction), the overall trend line still remains slow or stagnating growth.

The Great Recession of a few years ago taught transportation company leaders the value in running a lean operation, to focus on the most profitable markets, to improve yield management and to hold back on making asset purchases.  A recent Harvard Business Review article (CEOs Need to Get Serious About Sales by Ram Trichur, Maria Valdivieso de Uster, and Jon Vander Ark, July 10, 2012), argues that effective sales management is still overlooked by many CEO’s including trucking company CEO’s.  Here are a few thoughts on how to increase the productivity of a freight sales team.

Direct the team to the most profitable lanes and markets

What can trucking company leaders do to energize their sales efforts in a stagnating economy?  First, they need to make sure their sales efforts are very focused and productive.  This starts with sharing the company’s vision and profitable routes with their sales team and ensuring that the team is directed to generating the type of business the company needs most.  An unfocused sales team is an unproductive sales team. 

Think “Network” rather than “Lanes”

For the third consecutive year, Dan Goodwill & Associates and BIG Media, publishers of Truck News, Canadian Transportation & Logistics and MotorTruck Fleet Executive, will be co-hosting a Freight Transportation Conference. In prior years, separate conferences were organized for shippers and carriers. The 2012 Surface Transportation Summit (www.surfacetransportationsummit.com, #Tsptnsummit) will bring both groups together to foster dialogue and networking.

The 2012 Summit will take place on Wednesday, October 17 at the Capitol Banquet Centre that is located at the corner of Dixie Road and Courtneypark Drive in Mississauga. It will focus on all forms of road and rail freight transportation. Prior conferences were held in the spring and summer months. The switch to a fall date was made to provide the attendees with a “year in review” perspective on the past year and a look ahead to the New Year.

Carlos Gomes, Senior Economist at Scotiabank, will again kick off the conference and provide his insights on where the economy in general and transportation in particular are headed as we approach the New Year.

Carlos will be followed by a joint presentation from Lee Palmer, President, Palmer Marketing and me on Social Media in Transportation. The two speakers will:

• Review the fundamentals
• Address the big four social media and outline how they fit into a company’s core business strategies
• Show industry examples where they have been applied properly...and poorly
• Review first steps, associated costs and key benefits in the areas of brand building, customer retention and recruiting.

Over the past several decades, “Offshoring” has become a very popular supply chain strategy.  The low costs of production in many Asian countries combined with enhanced ocean shipping and improved North American intermodal services have made this sourcing option very attractive to many manufacturers and retailers.  The Offshoring movement accelerated as companies in a variety of industries followed their competitors abroad and moved manufacturing jobs to other countries.  The Great Recession was a further tipping point in the reduction of North American manufacturing jobs. Recent economic data suggest that manufacturing is slumping in the United States and Canada and it is being pulled down by drops in new orders and shipments.

The Asia outsourcing curve may be about to reach an inflection point.   Labour costs in China have been doubling every three years.  Changes in currency levels and energy prices have also altered the equation.  If one factors in labour costs, freight costs and the Total Cost of Ownership in bringing goods from China to North America, as compared to manufacturing them here, the TCO’s are expected to converge in 2015 according to Harry Moser, Initiative Founder at the Reshoring Initiative (http://www.reshorenow.org/), a non-profit organization based in Chicago, Illinois. 

Mr. Moser argues that about sixty percent of cost studies are flawed.  They do not reflect the full set of variables and the full range of costs involved in offshoring. 

The Reshoring Institute offers a free software tool (TCO Estimator) and a manual to perform detailed calculations and allow users to make informed decisions.  The cost model includes 29 cost factors.  Using a set of pull down menus, freight costs from 17 countries, duty costs and various risk elements, the TCO tool allows companies to make accurate comparisons. Mr. Moser indicated that the model is based on moving goods from China to Chicago and the calculations use in $U.S.  Upon questioning, he indicated that Canadian companies should be able to use the model and make the appropriate adjustments for moving freight to a major Canadian city (e.g. Toronto, Montreal). 

Results from a recent survey indicate that 61% of larger companies are considering bringing manufacturing back to the United States.  He listed a number of major corporations that are Reshoring at least some of their manufacturing back to the USA.  They include Caterpillar, General Electric, Ford, NCR and Master Lock.

In last week’s blog, my panel of three expert drivers spoke out on the topic of driver shortages and compensation.  In this week’s blog, we will explore the topics of recruiting, training and student drivers.

Let’s talk about recruiting.  What are your thoughts?

“Just last week I read a recruiting ad that claimed that team drivers could make $100,000”, commented Desiree Wood.   ‘Could’ is the operative word I suppose but in reality the context of the ad was to mislead. The ad was for a lease program which depicted 2 people at a carrier known for extremely low pay to drivers but their recruiting ads tell a different story. The ad does not say what costs will be paid back to the carrier from the gross “could make” amount, if the lease payment is based on both people . . . (driving) . . . or other hidden charges. This is a carrier that should be training candidates to become qualified drivers but instead they are selling trucks to people who know very little about what the trucking industry is really all about.

Drivers are bombarded with less than accurate information and this lack of respect is a contributor to industry burnout among qualified candidates hoping to make truck driving a career.  There are many qualified men and women in the trucking industry already that remain at poor paying carriers until they burn out simply because they cannot trust carriers to deliver the pay or benefits they advertise. . .

It is stressful to be away from family support, work long unpaid hours in extreme weather conditions and have to share difficult living situations while having to adjust to odd sleep schedules.  When candidates are recruited into truck driving, frequently they are unaware of all of these factors, nor  (are they aware) . . . that they will be expected to drive 11 hours per day on top of the unpaid labor they have performed.  Truth in Logistics would help define qualified candidates but this common sense approach takes aim at the inner commission structures in the recruiting and student trucker industry.

I have been writing a blog on a variety of freight transportation issues for the past 5 years.  None has generated as much feedback as my two postings on the subject of driving a truck and driver shortages.  While my blogs can be read in multiple locations, the two recent ones on this topic have received over 2500 hits and 60 comments on the Truck News site alone, many from drivers. 

I have read all of the comments and they encouraged me to reach out to some folks in the field to do a “deeper dive” into the “driver shortage” issue.   As a result, I contacted three truck drivers and sent them a list of questions.  David Robson was the one who helped me write the article on a “Driver’s Perspective on the Current State of Trucking.”  The other two (e.g. Stephen Large, Desiree Wood) are prominent truckers who took the time to share their feedback on the blog.  Here are their thoughts.

One of the recurring themes that I kept hearing is that despite the common perception that we have a “driver shortage” in North America, this is not an accurate description of the current situation. So my first question to the three drivers was to obtain their thoughts on this question.  Do we or do we not have a driver shortage?  Here is what they said.

Dave stated, “I feel we have a driver retention problem that is created by a lack of extensive driver orientation and training from the hiring trucking companies. This leaves the newly hired drivers to learn the company and driver policies on their own. In their frustration they find it easier to quit and move on. I am sure that the compensation was acceptable when they agreed to work for the company.

Problem number two I feel is driver dispatch compatibility. Many dispatchers are not people oriented and therefore drivers cannot work with their dispatch and again find it easier to quit and move on.”