Latest blog entries https://www.dantranscon.com/index.php/blog/latest Mon, 12 Nov 2018 22:34:34 +0000 Joomla! - Open Source Content Management en-gb The STS Focused on the Profound Changes Shaping the Canadian Transportation Industry in 2019 https://www.dantranscon.com/index.php/blog/entry/the-sts-focused-on-the-profound-changes-shaping-the-canadian-transportation-industry-in-2019 https://www.dantranscon.com/index.php/blog/entry/the-sts-focused-on-the-profound-changes-shaping-the-canadian-transportation-industry-in-2019 b2ap3_thumbnail_dreamstime_l_111013038.jpg

The Surface Transportation Summit celebrated its 10th anniversary at the International Centre on October 10. The event addressed the profound changes that have taken hold of the Transportation industry in 2018 and where they will likely lead us in 2019.

Paul Ferley, Assistant Chief Economist, Royal Bank of Canada, kicked off the day by highlighting that the US economy is operating beyond capacity. The U.S. is stimulating an already hot economy with tax cuts and low interest rates. As we look ahead to 2019, he noted that the level of future growth will depend on the actions of economic policy-makers.

Rising oil prices, still accommodative monetary policy and strong U.S. growth have moved the Canadian economy to capacity. The new USMCA (formerly NAFTA) trade agreement has created stability although with tariffs on steel and aluminum, and a president who can act erratically, this could change at any time.

The U.S. Federal Reserve’s objectives will likely be to try to moderate the level of activity. The concern is that President will try to boost an economy that is already over capacity. In Canada, a low dollar coupled with rising oil prices and ongoing increases in interest rates by the Government of Canada are expected to moderate growth.

Steven Laskowski, President, Ontario Trucking Association and Canadian Trucking Alliance, highlighted the worldwide rise of nationalism. He specifically identified that in the USMCA, there is now a cap on Canadian exports of auto parts to the United States. The nationalism movement will have an impact on the Canadian trucking industry.

The moderator for this track, Lou Smyrlis, Managing Director, Trucking and Supply Chain Group, Newcom Media Inc., stated that the strong economy has exposed a human resource problem in the transportation industry, namely the well publicized shortage of drivers and mechanics. Steven Laskowski responded by saying that there is a requirement for the Canadian government to rethink its immigration policies. Over the past decade, the objective of the policy has been to bring in people with strong skills and academic credentials to bolster Canada’s workforce.

It is becoming increasingly difficult to attract people to become long haul drivers. Mr. Laskowski noted that Texas and California are the top two states for long haul trucking out of Toronto. Young people are not interested in sleeping in their trucks or in motels or being away for extended periods of time. In the short term, the government must do more to encourage immigrants to come to Canada to perform these jobs.

Longer term, there is a requirement to make some structural changes to the trucking industry. Mr. Laskowski stressed that Canadians must make the necessary investments in safety, the environment and labour to build a healthy trucking industry. The government should be providing regulations that foster improvement in these areas; it should encourage carriers that are not meeting these requirements to make improvements or withdraw from the industry.

Mr. Laskowski also spoke about the impact of technology on the trucking industry and on supply chains. His message was that technological change is transforming the industry into a safer business and into a business that will change how and where products are manufactured. The takeaway from his observations: “If you aren’t changing, you aren’t growing.”

David Ross, Research Managing Director, Global Transportation & Logistics,Stifel Financial Corp. then addressed the U.S. market. He pointed out that the truckload sector represents seventy percent of the U.S. transportation industry. He observed that small fleets are growing more quickly than large fleets. He mentioned that while truck fleets are growing, “they don’t come with drivers.” Mr. Ross stated that for large fleets, 5 to 10% of their fleets are parked because they cannot find enough qualified drivers.

On the other hand, trucks are getting safer and more energy efficient. Some new trucks are achieving 9 miles to the gallon. He also spoke about the shift in the age of truck drivers. The average age of drivers has been moving progressively higher over the last few years. Forty percent of drivers in the U.S. are now over fifty years of age. Mr. Ross reviewed a list of the factors reducing and increasing truck capacity in the U.S. While there are some countervailing forces, the net impact of ELDs, HOS changes, CSA etc. have more than offset the positive capacity forces (i.e. miniaturization, LCVs etc.).

Looking at the demand side, Mr. Ross stated that we are in the “late innings” of this economic cycle. He referenced some of the key metrics that his company tracks (i.e. ISM index, retail to sales ratio) and expressed the view that the strong economy will continue for the next six months but at some point, it will begin to contract.

The spike in freight rates has been well documented. Mr. Ross identified the recent softening in rates in the spot market as shippers move to contract rates or dedicated fleets. Looking ahead to 2019, strong demand will still be met with a driver shortage that will continue to put upward pressure on freight rates. The more moderate growth in 2019 will probably result in rate increases in the high single digits versus the double digits of 2018. Intermodal growth will not be as strong since rail service is not good. Nevertheless, the railroads continue to capitalize on their monopoly/duopoly position.

He concluded his remarks with some suggestions on what shippers can do to address these powerful forces. He suggested taking a second look at the company’s supply chain. This includes packaging improvements, possible modal changes, longer contracts, guaranteed volumes, wider delivery windows, and even offering coffee and bathroom facilities for company drivers all make a difference. He stressed that “collaboration is key.” This should include providing better data-sharing and partnering with carriers/3PLs but also potentially with other shippers. 

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Surface Transportation Summit Sat, 20 Oct 2018 19:41:08 +0000
Driver Compensation – The Devil is in the Details https://www.dantranscon.com/index.php/blog/entry/driver-compensation-the-devil-is-in-the-details https://www.dantranscon.com/index.php/blog/entry/driver-compensation-the-devil-is-in-the-details b2ap3_thumbnail_dreamstime_l_92522695.jpg

Over the past few years, one of the defining challenges in the freight transportation industry has been a shortage of qualified drivers. In April of this year, I posted a blog (https://www.dantranscon.com/index.php/blog/entry/what-are-trucking-companies-doing-to-solve-the-driver-shortage ) that examined the range of compensation tools and benefits that are being offered to recruit and retain drivers. In another blog (https://www.dantranscon.com/index.php/blog/entry/trying-to-solve-the-driver-shortage-try-paying-them-a-salary ), I suggested that some trucking companies should consider paying, at least some of their drivers, an hourly rate or salary. The following are some additional compensation schemes that carriers are employing and a few thoughts on the effectiveness of these programs.

Multiple Pay Increases in the same year

To stay competitive, some carriers are providing their drivers with multiple pay increases to ensure they stay on par with the competition.

Payment for Practical Miles

Some carriers are paying drivers on practical route miles. The PC*Miler practical miles pay program compensates drivers according to the driving routes and distances they are most likely to take. PC*Miler practical route miles tend to be 8% higher than household goods miles.

Monthly Mileage Bonuses

Another compensation approach is to pay drivers a monthly mileage bonus of 1 cent per mile for every mile over a designated number of miles (i.e. 11,000 miles).

Fuel Performance Bonus

Carriers are paying a semiannual fuel/performance bonus of .5 cents per mile based on their energy optimization.

Safety Bonus

Drivers with a strong safety record can earn an annual bonus (i.e. .5 cent per mile) at the end of the year.

Student Driver Compensation Plan

Bringing new entrants into the driving profession is critical to the trucking industry. New driver compensation is essential to recruitment and retention. Pay raises for student drivers and pay for experience progression keeps good performers on a positive compensation trajectory.

Points Programs

In one company, drivers could enter a sweepstakes by either swiping their rewards card at Love’s in September, or by visiting a Love’s location with a touchscreen and following the steps on the 1 Million My Love Rewards points giveaway section. At the end of the month, all card swipes and touchscreen completions from Sept. 1-30 counted as individual entries. Thousands of professional drivers were eligible to win 10,000 My Love Reward points ($100 retail value), and one driver could win 1 million points ($10,000 retail value), from Love’s Travel Stops as part of a company’s National Truck Driver Appreciation Week celebration.

Stock Ownership

Some companies offer an Employee Stock Ownership Plan (ESOP). After 1 year, employees are eligible to be vested in the program.

Teaming Bonuses

Some truckload carriers have introduced teaming bonuses. In one case, a $40,000 Teaming Bonus is structured to pay $2,000 in bonus money to each driving team that eclipses 60,000 paid miles together, until the team reaches a total $40,000 in bonus money. Another truckload carrier offers a similar program, but the bonus level is $50,000, an attempt to make their program slightly more attractive.

Some thoughts on the various Driver Compensation Programs

While these incentive programs sound appealing, the devil is in the details. if you dig into the details of the teaming program, you find out that it will take five years to achieve the full value of the bonus, if the drivers are willing to stay with the company long enough to reach the threshold. Like many driver incentive programs in the industry, it requires drivers to make an extraordinary effort to achieve them.

A spokesperson for a major truckload carrier noted that the average team driver drives 210,000 miles annually. To achieve the full bonus, they would need to stay in the seat for 70 months. Even more challenging is the fact that the two members of the driver team must stay together throughout the bonus period. This may work for married couples, but not necessarily for other pairings. The fact is these bonuses are unlikely to be paid out.

Other sign-on and incentive bonuses are of questionable value and often ineffective when it comes to driver retention and turnover. They may not attract the quality driver that companies are looking for. Drivers that are attracted by a sign-on bonus are most likely to jump to the next sign-on bonus once the first one is fulfilled. Drivers trying to make good career decisions need to do their due diligence, speak with drivers in other companies, evaluate how the companies are run, and find out if the incentive programs are attainable. Carriers seeking to hire good drivers should think through how their drivers are being managed and carefully and objectively assess the value of their compensation programs. If they are not attracting and retaining quality people and reducing turnover, it is probably time for a change.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Driver Shortage Tue, 02 Oct 2018 14:15:18 +0000
Message to PM Trudeau and Minister Freeland: Don’t Let Canada be Bullied on NAFTA https://www.dantranscon.com/index.php/blog/entry/message-to-pm-trudeau-and-minister-freeland-don-t-let-canada-be-bullied-on-nafta https://www.dantranscon.com/index.php/blog/entry/message-to-pm-trudeau-and-minister-freeland-don-t-let-canada-be-bullied-on-nafta b2ap3_thumbnail_v3-trump_naftarenegotiation_05-17-1_20180902-210401_1.jpg

These are distressing times for Canadians. Despite numerous meetings between the Canadian and U.S. (and Mexican) delegations over the past year, NAFTA negotiations reached another impasse on Friday, August 31. It is not surprising.

The Americans have negotiated in bad faith. Canada was excluded from the recent negotiations between the U.S. and Mexico. Rather than just negotiate the exchange of auto parts and minimum salaries for auto workers, the two parties reached an agreement on a much more extensive range of issues. Clearly the Americans sought to and succeeded in muscling the Mexicans into agreeing to a 2-way pact with them. The Mexicans were also not forthcoming in advising their Canadian counterparts of their intention to reach a multi-faceted two-party agreement with the Americans.

President Trump is threatening to apply a 25 percent tariff on auto parts manufactured in Canada if he doesn’t receive concessions on access to Canada’s dairy market, on a dispute settlement mechanism and an increase in the level of duty-free purchases. According to a John Holmes, a Queen’s University professor emeritus and research fellow at the Automotive Policy Research Centre (https://www.macleans.ca/economy/what-will-happen-if-trump-slaps-a-25-per-cent-tariff-on-canadian-made-cars/?utm_source=nl&utm_medium=em&utm_campaign=mme_weekly&utm_content=202508&utm_term=0&sfi=df0198bed6a37f0cdd34c52c77052eef ), the impact on Canada would be “disastrous.”

The oddity in applying these tariffs is that American consumers would be the first ones to feel the impact. According to industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants, automakers would pay an extra $5,000-$7,000 for the vehicle they plan to sell. “Unless the auto companies chose to eat some of the extra costs, it would price most of those vehicles out of the marketplace,” DesRosiers says. “There’d be no choice for consumers.” Americans won’t be happy paying thousands extra for a Toyota RAV4 simply because it came from Canada—meaning the nearly 1.8 million vehicles Canada ships south of the border annually would have a much tougher time finding a home.

Mr. Holmes also mentions in the article that “many of those Canadian-made cars include parts that come from the U.S.—as part of a complex supply chain that’s developed over decades. Currently, Canadian companies ship $35 billion worth of auto parts each year, many of them to assembly plants in the U.S., and the parts trade flows in the opposite direction. If you’re going to cut off vehicle production in Canada, you’re indirectly reducing the demand for U.S.-made parts, Holmes adds.

Moreover, with no assembly plant ready in the U.S. to immediately boost production, DesRosiers says there will be a shortage in the overall supply of automobiles, meaning the price for all vehicles in America—and not just ones shipped from Canada—will inevitably start to creep higher and higher.” The net impact on Canada is projected to be a potential loss of 160,00 jobs, mostly in Ontario where the bulk of the auto manufacturing is done. Of course, there would be additional job losses in related industries (i.e. car dealerships). If the US applies its auto tariff exclusively on Canadian cars, this would reduce auto production by 900,000 units and reduce Ontario’s GDP by about one percent.

This begs the question of what Trump is trying to accomplish by threatening to take this harsh action. Canada has been a loyal US friend and ally for decades. The two countries share the largest unguarded border in the world. Canada is the largest single market for 35 US states. Millions of American jobs are based on manufacturing goods for the Canadian market.  The Canadian negotiating team has signaled that it is prepared to compromise on the few remaining contentious issues.

For President Trump to state that the negotiations must be “totally on our terms” suggests that this is either a bluff or a tactic to bully Canada (as he has done with other countries). Whatever the rationale, I encourage Canada’s leadership team to display flexibility but stand their ground. No Canadian wants to see job losses in the auto, dairy or any other sector. On the other hand, no Canadian wants to see its leaders capitulate to a bully. Hopefully cooler heads will prevail and a new NAFTA agreement, that benefits all three countries, will come together in the next few days.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) NAFTA Sun, 02 Sep 2018 21:02:01 +0000
The New Realities of Procuring Freight Transportation Services https://www.dantranscon.com/index.php/blog/entry/the-new-realities-of-procuring-freight-transportation-services https://www.dantranscon.com/index.php/blog/entry/the-new-realities-of-procuring-freight-transportation-services b2ap3_thumbnail_dreamstime_l_56602038.jpg

Those of us who came into the freight transportation industry in the 80s and 90s remember when there were distinct sets of service providers. There were small parcel carriers, LTL carriers, full truckload service providers and rail carload operators. Of course, during slow times, truckload carriers would move some large LTL shipments. The small parcel carriers targeted shipments in the low end of the LTL freight sector. Even back in the 80s. truckload consolidations (of multiple LTL shipments) were popular in certain industry segments (i.e. auto parts). However, these four labels were a pretty good reflection of the major types of transportation services available at that time. Companies in each of these segments had a unique core competence and tended to operate in their area of expertise.

Today, Transport Topics and other journals still publish lists of the top 100 truckload carriers and top 50 LTL carriers. However, when you examine the business activities of a number of companies in each sector, you realize that these labels no longer fit well with the diversity of services that many trucking companies currently provide.

As an example, JB Hunt has been known for years as one of the premier truckload carriers in North America. At one point in time, this was a very accurate description of this company. However, when you examine the revenue of this company, over-the-road truckload freight now represents only five percent of the total. Through a focused business strategy and organic growth, intermodal transportation, dedicated fleet movements and freight management now make up the bulk of their business.

XPO Logistics, through their acquisition of Conway, has $3.6 billion in LTL revenues and now ranks third in the rankings of LTL carriers. This company, well known for its large logistics operation, now has a strong presence in two of the major sectors of the freight transportation industry.

Similarly, TFI has $748,000 on LTL revenues on the TT rankings but this represents a fraction of this company’s business that includes hundreds of millions of dollars in revenue from their stable of truckload, small parcel, and freight management services.

Forty years ago, there were limited home delivery freight services except for the Sears catalog and a few other mail-oriented home shopping services. There were no laptop and tablet computers, no smartphones, and no internet. Ecommerce and Last Mile Delivery did not exist; today the growth in these services is outpacing the growth of regular retail sales. In fact, some sectors of the asset-based retail environment are consolidating. The business world has changed dramatically, and the freight transportation industry has had to adapt.

Companies such as Amazon and many smaller entrepreneurs are transforming the distribution and retail sectors, and the freight industry. To be relevant, many freight transportation companies recognize that they need to provide a broad range of services to serve warehouses, fulfillment centers, businesses, retail stores and home consumers. This means that they must quickly and successfully expand their range of core competencies.

This poses some unique challenges for shippers and transportation companies. The question for shippers is how to find transportation companies that are not only diverse but that have a high level of expertise in each of the sectors that they serve. The challenge for carriers, particularly smaller carriers, is whether to stay small but competent in their area of core competence or try to build their revenues in their area of expertise while expanding into other sectors. Being good in one segment of the business is no guarantee success in another sector. The small parcel, LTL and truckload sectors require different types of terminals, technology and fleet equipment. For many companies, it makes far more sense to form alliances and partnerships rather than build or buy a business or businesses. In some cases, it makes more sense to focus on core competencies and divest from those segments of the business that they cannot operate as well.

As an example, Hub Group is exploring a possible sale of Mode Transportation, an operating unit that provides truck and rail freight brokerage and logistics services. The move comes at a time when the Oak Brook, Ill.-based company is reporting a surge in business and big gains in profits. In a statement Aug. 1, Hub said it is exploring “strategic alternatives” for Mode, one of two freight brokerage businesses units that operate within the company. Proceeds from a sale would be used for investments in existing Hub businesses, including technology initiatives and for acquisitions of businesses in new and existing service lines, the company stated.

The fact is most people and companies are not good at everything. We all have our strengths and weaknesses. For shippers, this means that they must identify transportation companies with core competencies in specific areas, rather than search for “pure” carriers that have certain levels of revenue in the same categories of revenue that existed 40 years ago. They must look internally to identify the range of services they need and then seek out transportation partners that can provide holistic rather than limited subsets of service. They need to find transportation providers that can seamlessly and effectively link various supply chain components (i.e. manufacturing facility to warehouse, warehouse to fulfillment center, fulfillment center to home consumer). Certainly, this gives the freight management companies a big advantage since this is what they have been doing for years.

This also means that companies that publish lists of transportation companies must step up their game. While it is important to list companies that provide LTL and truckload services, shippers now need to be able to identify the full range of services offered by each company (i.e. small parcel, local cartage, Last Mile Delivery, over-the-road and intermodal truckload, freight management, dedicated fleet, expedited transportation, warehousing, freight forwarding, customs clearance, air freight and ocean shipping). They also need to be able to evaluate the competence of each company in each of the sectors they serve.

Shippers need to be able to see the level of business from each sector but also years of experience, client list, and the resources the transport provider can apply to each sector (i.e. size of fleet, number or personnel, IT capabilities, quality of management team, etc.) to determine which companies to include in their procurement activities. At this point in time, shippers require more robust tools to identify those players that can provide high quality, integrated solutions to meet their ever-expanding needs.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Best Practices in Freight Management Tue, 07 Aug 2018 15:34:59 +0000
The 10th Anniversary Surface Transportation Summit Will Address many of the Key Issues Facing Professionals in this Industry https://www.dantranscon.com/index.php/blog/entry/the-10th-anniversary-surface-transportation-summit-will-address-many-of-the-key-issues-facing-professionals-in-this-industry https://www.dantranscon.com/index.php/blog/entry/the-10th-anniversary-surface-transportation-summit-will-address-many-of-the-key-issues-facing-professionals-in-this-industry b2ap3_thumbnail_STS_plus_10-Anniv-logo.jpg

Ten years ago, my colleagues at Newcom Business Media and Dan Goodwill & Associates set out to create a high quality educational and networking event for Transportation Professionals and Decision-Makers. From humble beginnings, the conference has evolved into Canada’s premier event in the Surface Transportation Industry. The Surface Transportation Summit now attracts hundreds of Logistics executives, Transportation Industry owners and leaders, vendors to this industry, government officials, consultants, educators, and students.

To celebrate the tenth anniversary of the Summit, the organizers, in partnership with the Freight Management Association of Canada, the Canadian Trucking Alliance and the CSCMP Toronto Roundtable have created an agenda that encompasses the most important issues of the day and assembled an elite group of moderators and panelists to address these topics. As always, the conference will begin with a discussion of the top forces that have shaped the economies and the freight industry in Canada and the United States in 2018 and will power it in 2019. Paul Ferley, Assistant Chief Economist, Royal Bank of Canada, will provide an overview of the direction of the Canadian economy. He will be followed by Walter Spracklin, Managing Director, RBC Capital Markets and David Ross, Research Managing Director, Stifel Financial Corp who will discuss the trucking and rail industries in Canada and the United States. This will be followed by a moderator led discussion with Paul Roach, President & CEO, Belmont Meat Products and Scott Smith, President, JD Smith & Sons who will share their insights on the economic projections for 2019.

The will be followed by an inside look at New Freight Transportation Technologies for Manufacturers, Distributors, and Retailers. In brief interviews, Brian Hodgson, VP, Transportation Strategy, Descartes Systems will provide some thoughts on Shipment Visibility, Dave Brajkovich, Chief Technology Officer, Polaris Transportation Group, and Iliana Oris Valiente, Managing Director, Accenture | Founder at ColliderX Blockchain R&D Hub, will discuss the Blockchain movement, Martin Abadi, Counsel, Borden Ladner Gervais LLP will provide his insights on Connected Trucks and Charles Fallon, Principal, Supply Chain Intelligence will talk about Warehouse Automation.

The Shipper-Carrier Roundtable has always been a popular track. This year Dan Einwechter, Chairman and CEO, Challenger Group of Companies, Tracy Raimondo, Vice President, Logistics, Normandin Transit, John Ferguson, President, Purolator, Andrew Fuller, Assistant Vice President, Domestic Intermodal, CN Rail, Geoffrey Joseph, President & CEO, Joseph Haulage Canada, Martin Pede, Manager Zinc Sales, Hudson Bay Mining and Fiona Renzi-Fantin, VP, Supply Chain, Maple Leaf Foods will debate some of the hot issues facing shippers and carriers in 2018.

The afternoon will feature three tracks that will run in parallel. This allows the attendees to select those topics that are the best match for their interests and priorities. While today’s supply chain is becoming longer and more complicated, customers are demanding shorter delivery times at low or no cost. Kerry Rambalie, Senior Manager, Domestic Transportation, Gap Inc. and Michael English, Managing Director, Accenture will address how a cost effective Last Mile Delivery option is the ticket to entry in the Ecommerce market.

The mandated implementation of electronic logic devices in the United States in December 2017 has had a significant impact on capacity and on the provision of some truckload services. Mark Seymour, President, Kriska Transportation Group, Stephen Laskowski, President, Canadian Trucking Alliance and Barry Somerville, Safety Project Manager, FedEx Ground, based in Pittsburgh, PA will share their experiences on the US ELD implementation and provide some tips for the upcoming implementation in Canada.

The third track in this set will provide the attendees with opportunities to meet in small moderator-led groups to discuss LTL shipping, truckload shipping, intermodal and rail transportation and Canada’s new trade agreements. Ray Haight, Founder, Stack Up, Andrew Fuller, AVP Domestic Intermodal, Sales & Marketing, CN Rail and Bob Armstrong, President, Chartered Institute of Logistics and Transport in North America will be three of the moderators.

This set of tracks will be followed by three more. Driver shortages, tight capacity, and rising freight rates are among the challenges being faced by shippers in 2018. Jack Bradley, Vice President, Supply Chain, Inventory Control and Logistics, Strongco, Nick Nanos, Vice-President, Distribution and Logistics, LCBO and Jim Bonsteel, Area Vice President, Transportation, Customs and Compliance – Global, Anixter will share their thoughts on how to manage a freight budget in 2018.

The majority of fleets in Canada have 20 trucks or less. This track will focus on strategies that small carriers can employ to achieve success. Leanne Quail, Operations Manager Paul Quail Transport and Brian Taylor, President, Liberty Linehaul will provide their thoughts.

The Freight Brokerage/Freight Management industry is being re-engineered as digital freight matching services are now available as an app on a smartphone. Mark Hong, VP, North America, CH Robinson, Eric Beckwitt, President, Freightera, Valerie McSween, Vice President, Eastern Region, Mactrans Logistics Inc. and Devlin Fenton, CEO, Go99 will participate in a panel discussion on the challenges and opportunities in this important sector of the freight industry.

The Summit will conclude with a soon to be announced high quality keynote speaker. A prize draw/cocktail party hosted by the Freight Management Association of Canada will wrap up the day. As always, the Summit will feature networking breaks throughout the day so those who register can meet friends, customers, colleagues, and prospects. There will be sponsor tables just outside the main conference hall, so the attendees can learn more about the services they provide.  The Early Bird Registration is still in effect. Register now to secure your seat for this important industry event.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Surface Transportation Summit Sun, 15 Jul 2018 21:16:54 +0000
The Truckload Freight Industry in North America in 2018 – “Maybe the Best Freight Market we have ever seen” https://www.dantranscon.com/index.php/blog/entry/the-truckload-freight-industry-in-north-america-in-2018-maybe-the-best-freight-market-we-have-ever-seen https://www.dantranscon.com/index.php/blog/entry/the-truckload-freight-industry-in-north-america-in-2018-maybe-the-best-freight-market-we-have-ever-seen  

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The truckload sector of the freight industry is different from the LTL and small parcel segments in two significant ways. Unlike the other two segments, anyone who can buy or finance the purchase of a tractor-trailer unit and can drive the rig, can enter the industry. Freed from the requirement to build cross-dock facilities and/or buy sorting machines, the barriers to entry are low.

There are approximately 540,000 truckload carriers registered with the Federal Motor carrier Safety Administration in the United States. These range from 1 truck to 20,000 truck fleets. The majority have less than 20 pieces of equipment in their fleets. These companies are projected to generate $358.6 billion in revenue in 2018. The comparable Canadian number would probably be in the range of ten percent of these numbers. The truckload sector is about ten times the size of the LTL sector.

Revenue/Tonnage Growth in 2018

Here is a link (http://www.ttnews.com/top100/for-hire/2017 ) to the top 50 truckload carriers in the United States and Canada that are listed in the June 22, 2018 issue of Transport Topics. Swift Transportation, Schneider National, J.B. Hunt Transportation Services, Landstar System and Werner Enterprises are the five largest US based truckload carriers; TFI (formerly TransForce International), Trimac Group, Mullen Group, Bison Transport and Challenger Motor Freight are Canada’s largest truckload carriers. It should be noted that TFI now derives roughly 50% of its revenues from the United States.

In May, year/year truck tonnage in the U.S. was up 7.8 percent over last year according to the American Trucking Association (ATA). Trucks carry approximately 70% of all domestic freight in the US economy, moving manufacturing, wholesale, and retail goods to their next destination. Historically, truck tonnage has been closely linked to broad economic indicators such as total industrial production, retail sales, and GDP; improvements in tonnage are consistent with the general theme of an improving economy in the 2nd quarter.

Truckload Carrier Revenue has been surging this year due to a confluence of factors. They include a strong economy in both Canada and the United States, the ongoing driver shortage, the Electronic Logging Device mandate that came into effect in December 2017, rate increases driven by cost increases in labor, fuel, and equipment and by some other powerful forces.

The ATA’s Chief Economist Bob Costello noted: “This continues to be one of the best, if not the best, truck freight markets we have ever seen. May’s increases…not only exhibit a robust freight market, but what is likely to be a very strong GDP reading for the second quarter.”

The Year  of the Driver

This is clearly the Year of the Driver in Truckload Transportation. Within a year after being hired, a truckload driver can expect a $10,000 bump in pay to at least $60,000 a year, according to Craig Callahan, executive vice president and chief commercial officer of Werner Enterprises Inc. Those pay rates are just the price of admission, Callahan said.

Driver pay is likely to escalate in the months and years ahead, with experienced drivers pulling down $80,000 a year or more, and salaries for qualified team drivers, who are in very short supply, topping $100,000 a year, Callahan said. Werner is hiring about 10,000 drivers a year just to keep pace with annual turnover and shipper demand, he added, but warned that even that pace of hiring will not, in and of itself, remedy all of its customer service challenges.

Carriers have increasingly reported offering higher wages, larger signing bonuses, and improved benefits to attract potential workers. In response, trucking hires have made noticeable improvements throughout the course of the year, increasing in eight of the last nine months.

The ELD Mandate

The U.S. federal government's mandate that virtually all trucks built after the year 2000 be equipped with electronic logging devices (ELDs) has cut fleet productivity by between 3 to 10 percent since the mandate took effect Dec. 18, 2017, according to unscientific estimates highlighted at a recent NASSTRAC conference. The mandate is designed to ensure that drivers can no longer alter their paper logbooks to operate beyond the federal requirements of their hours of service, which limit drivers to 11 consecutive hours behind the wheel in a 14-hour workday, with a 30-minute rest break within the first 8 driving hours.

The ELD mandate disrupted shipper networks where they least expected it: in the short haul. The biggest problem has been in 650 to 700-mile hauls, which are difficult for drivers to complete in one driving day, especially if they need to return to a home base after delivering their shipment. With driver reticence to haul those loads keeping supply tight, that segment is seeing a significant amount of price inflation.

Shippers have reported that loads that used to be readily accepted were being refused with regularity. Often, these were loads that would take five to seven hours to deliver. Suddenly, truckers didn’t have the additional hours to find parking, or get to the next load. The loss of those extra hours for truck drivers translates to longer transit times for shippers. A Zipline Logistics study found a 16 percent increase in transit times on 450- to 550-mile hauls, traditionally one that drivers would complete in single day. Canada is scheduled to adopt the ELD requirement in 2019.

Big Increases in Freight Rates

The laws of supply and demand have taken hold of the truckload segment of the freight industry. Tight capacity, the impact of the ELD mandate and higher wages are producing higher than usual increases in freight rates. Year/year, truckload rates are up about 8 percent. Many shippers are experiencing double digit rate increases.

With trucking companies rejecting one of every three to four loads, shippers are deciding to pay more for dedicated contract carriage, locking in a specific number of trucks each week rather than taking a chance on the spot markets. There is evidence that contract rates are rising more rapidly than expected. As of mid-April, the average contract linehaul van rate was 11.3 percent, or 19 cents, higher than at the same time last year, according to DAT Solutions. At Schneider National, the second-largest US truckload operator, rate hikes in customer contract renewals averaged low double-digit percentages in the first quarter. Shippers are reporting that their rollover freight — loads not picked up on the scheduled day to ship — is rising.

Ecommerce is creating New Services and Partnerships for Truckload Carriers

Ecommerce sales are expected to grow at an annual rate of 14.9 percent between 2012 and 2019. By 2019, e-commerce is expected to consume 20 percent of all retail sales.

As reported in my recent report on the LTL freight industry (https://dantranscon.com/index.php/blog?view=entry&id=317 ), e-commerce and Last Mile Delivery are growth segments for many LTL carriers. Truckload carriers have historically been heavily involved in the “first mile” (manufacturer to DC) and “middle mile” (DC to fulfillment center) segments, and in performing line haul for LTL and small parcel carriers.

Truckload and less-than-truckload (LTL) carriers are now both eyeing the e-commerce segment because of the growth of online orders of heavy goods not designed for a carrier's conveyor system. More large and heavy orders are being processed online as manufacturers and retailers broaden their product offerings that are available for web-based purchases.

Werner recently launched a final mile delivery service designed to carry outsized or heavy goods the last leg of their journey to a residence or a business. The company is employing a mix of its own fleet, LTL carrier partners, and a network of delivery contractors that specialize in "white glove" delivery services, which typically call for delivery and installation of the new item, and takeaway of the old item if there is one.

The service, called "Werner Final Mile," utilizes a fleet of "straight" trucks, vehicles with trailers 22 to 26 feet long, 8 to 8.5 feet wide, and 12.5 to 13.5 feet high. Each vehicle has lift-gate capabilities to raise and lower items between ground level and the level of a tractor trailer, with each manned by two uniformed employees who provide deliveries and installations.

Of course, adapting to e-commerce supply chains requires a new set of skills in terms of speed, time-specific deliveries, quality analytics and flexibility. This adaptation will bring its own set of challenges to truckload carriers.

The Road Ahead

In the United States, low unemployment coupled with high consumer confidence, bode well for the balance of the year. Consumer purchases are a key ingredient of the economy. Sustained consumer confidence would support a range of purchases and would be very positive for the truckload industry. US truckload capacity may get even tighter and prices rise to record highs during this fall’s peak season.

Some big dark clouds hang over the balance of the year and next year. The trade tariffs being imposed by President Trump and the reciprocal tariffs being applied by many of America’s key trading partners are now going into effect. These tariffs, if maintained, will likely diminish trade and shipping volumes. If they last long enough, they may cause job losses and adversely affect the economies of the countries involved.

Similarly, Canada, USA and Mexico are having difficulties concluding a new NAFTA agreement. Applying tariffs on car parts imported from Canada and the United States will drive up car prices for American consumers and could diminish sales (and freight volumes) in this important sector.

To sum up, this has been a booming year for the truckload sector. The general state of North American economies is strong, but tariff and trade issues could adversely affect the economies and truckload business in the three NAFTA countries.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Truckload Transportation Fri, 29 Jun 2018 13:59:35 +0000
The LTL Freight Industry in North America in 2018 https://www.dantranscon.com/index.php/blog/entry/the-ltl-freight-industry-in-north-america-in-2018 https://www.dantranscon.com/index.php/blog/entry/the-ltl-freight-industry-in-north-america-in-2018 b2ap3_thumbnail_dreamstime_l_74917618.jpg

The following is my annual report on the state of the LTL Freight Industry in the United States and Canada. Here are links to the top 100 carriers in Canada (https://www.todaystrucking.com/top-100-ranking-canadas-largest-hire-fleets/ ) and the top 25 LTL carriers in the United States (https://www.logisticsmgmt.com/article/the_top_25_trucking_and_less_than_truckload_ltl_companies_in_2017 ). The combined revenue of the 25 largest U.S. LTL trucking companies remained unchanged at $31.8 billion in 2015 and 2016, according to The Journal of Commerce’s 2016 ranking of the Top 25 LTL Carriers, prepared by SJ Consulting Group. In 2017 annual revenues grew by 7.8% to $34.5 billion.

The Booming Freight Market of 2017 - 2018

Freight volumes are strong as we approach mid-year. Carriers, hampered by a lack of drivers and faced with new time constraints due to mandatory electronic logging devices (ELDs) in the United States, are increasingly being selective in picking the best-yielding freight for their freight lines. LTL carriers are picking up volume from the tightening TL market. Some large TL carriers started rejecting lighter loads of 5,000 pounds to 10,000 pounds earlier this year, and that freight is now moving via LTL carriers. The net result is LTL freight base rates are soaring with some experts projecting increases of 4 to 5 percent or more. In addition, LTL carriers are doing a better job quoting accurate dimensional pricing and accessorial charges which also places upward pressure on rates. This environment will likely continue for the remainder of this year.

The LTL Industry remains a Non-Union “Big Boys” Game

The trend toward consolidation and concentration of revenue has been playing out for the past decade. The biggest LTL carriers in the U.S. and Canada keep getting bigger. The top three spots on the American LTL list continue to be held held by FedEx Freight, XPO Logistics and Old Dominion, all non-unionized carriers. The performance of Old Dominion is particularly impressive with an 82.5 operating ratio, a remarkable number for a fast-growing $3 billion LTL carrier.

The Canadian LTL industry continues to consolidate with TFI International (formerly TransForce), Day & Ross Group and Manitoulin becoming the dominant players in cross-border and domestic LTL transportation. FedEx and UPS remain significant players on cross-border LTL and small parcel shipping. While there are still some quality LTL carriers (i.e. Maritime-Ontario, TransX, Midland Transport) that are unaffiliated with the big three LTL players in Canada, shippers almost always must consider one or more of the giants in evaluating their LTL service options in every region of Canada.

In the United States, there are still eleven members of the “billion-dollar club.” They accounted for 82.8 percent of the Top 25 LTL revenue, as measured by SJ Consulting. The Top 25’s billion-dollar group last year was led by FedEx Freight, the largest LTL carrier and U.S. trucking company with $6.341 billion in revenue; XPO Logistics, with $3.641 billion in U.S. revenue; and $3.304 billion for national LTL carrier Old Dominion Freight Line. They were followed by YRC, UPS Freight, Estes Express Lines, ABF Freight System, R+L Carriers, Saia, Holland, and Southeastern Freight Lines.

Major Players Are Investing in operational Improvements and Technology

The major LTL carriers are investing in new technology to facilitate growth, improve yields and penetrate emerging markets. YRC recently re-engineered eight regional distribution centers to prepare for the growth it expects this summer. The LTL carrier took action to unlock underutilized capacity by converting eight existing terminals to distribution centers, effectively adding 837 doors of “transfer capacity” to its network, allowing the company to handle an additional 7,000 shipments a day. The expectation is for faster processing, greater density and fewer transfers of customer shipments. YRC also introduced 118 “meet-and-turn” relay operations involving 236 drivers from 20 terminals.

“YRC’s multi-year change management and technology investments around line-haul, pickup and delivery operations is now maturing into a 2018 benefit through overall mile reduction, better cube utilization and intended cost reduction,” stated Darren Hawkins, president, and COO of YRC Worldwide. “These large projects are being implemented in stages, and network benefits should continue to align around each additional install throughout 2018.” YRC is not alone. UPS, parent of LTL unit UPS Freight, says it plans to spend $12 billion on investments to expand its logistics network.

YRC is also using technology such as an applicant tracking system that allows for streamlining processes and reducing time to hire. “We’ve made investments in recruiting personnel to allow for additional driver training instructors throughout the network to support our tuition-free driving schools,” stated Dawkins in a recent Logistics Management article, adding that YRC operates over 80 driving schools throughout the country and continues to focus on promoting the dock-to-driver program to find over-the-road drivers from its most motivated dock workers.

For the past several years, major LTL carriers have been extending the proliferation of dimensionalizers on carrier docks. LTL carriers sell space on their trucks. These dimensionalizers provide more precise information regarding shipment size so LTL carriers are better able to capture the true cost of each shipment. The National Motor Freight Classification (NMFC) is less accurate in this regard. Carriers feel this dimensionalizer technology provides them with superior information about the costs to handle their customers’ freight. Carriers are also using analytics and business intelligence tools to drive pricing decisions.

A few years ago, when the LTL industry was comprised of many more firms, price wars would take place with each downturn in the economy. Many of these companies that lacked good costing systems and pricing discipline have exited the industry. The survivors have gained an understanding that they must hold the line on rates and focus on profitability. As these developments unfold, shippers are using technology to obtain competitive pricing and to route their LTL shipments.

3PLTL’s Become a Force

Third party logistics companies and freight brokers are picking up so much less-than-truckload freight these days that they are being labelled “3PLTLs.” They continue to control about 25 percent of the LTL market in the United States. This change is having a big impact on shipper-carrier relationships. The 3PTL’s have been moving in between the shipper and carrier in many cases and are forcing asset-based carriers to rethink their business models and sales approach to both segments. The growth of the 3PLTL as a key interface for LTL shippers has become a major change in the LTL market. One major 3PL, XPO Logistics took the opposite approach by purchasing Con-way Freight in 2015. This provides them with significant in-house assets in addition to the carrier network of their 3PL operation.

The Retail sector and eCommerce are becoming major components of the LTL business

Retailers and consumers are imposing some significant demands on carriers. These include compressed delivery windows, increased compliance thresholds and chargebacks for non-compliant or missing shipments. To address these challenges, shippers are seeking LTL carriers with fast, precise service offerings. When vetting carriers, shippers are trying to take control of window requirements by partnering with LTL carriers that offer expedited shipping, as well as guaranteed delivery windows.

Another option is pool distribution versus moving individual long-haul LTL shipments. This can reduce line-haul expense and possibly even transit days. By releasing individual shipments nearer to retailer distribution centers, LTL carriers manage the final delivery leg. A multi-modal approach (over the road and intermodal truckload and less-than-truckload) provide increased speed-to-market, particularly when working with approved regional carriers, designated by the retailer.

Some LTL carriers achieve a preferred status with retailers based on their performance. The preferred carriers are given priority scheduling and delivery. Additionally, this may afford a carrier greater flexibility on inventory management and storage. Selected carriers that have preferred status in conjunction with window delivery services at their destination terminal, are better positioned to ensure that inventory can be sent to arrive in advance of the must-arrive-by-date (MABD) and have it staged for delivery to meet specific window requirements.

Shippers are also focusing on lead times, the number of days between (and including) the day a purchase order (PO) drops and its MABD. They are setting up a shipping schedule to put a carrier’s standard transit time on or before the MABD. To ensure performance, some LTL carriers now have MABD customer service representatives to monitor these shipments.

Most LTL carriers today are also trying to figure out how to serve the eCommerce market. Retailers in the eCommerce space are building smaller distribution or fulfillment centers closer to consumers, emulating Amazon. In the past, inbound traffic to the DC would often be truckload. Now, with a shorter length of haul, many retailers are more inclined to use LTL. Some LTL carriers stand to benefit from eCommerce via their “middle mile” operations.

Some LTL terminal networks are being designed to handle that leg of the freight movement. While truckload carriers often serve the “first mile” (DC to fulfillment center), LTL carriers are becoming increasingly involved in the “middle mile” and “last mile” deliveries. These eCommerce shipments often involve smaller size shipments that require timed deliveries early in the day. For some LTL carriers this involves establishing smaller service centers in some markets and buying smaller size vehicles with lift gates to perform deliveries to customers that don’t have unloading docks.  LTL carriers are setting up time specific appointment windows and deliveries by 10:00 AM or before 5:00 PM.

Looking ahead to the future, LTL carriers are upbeat on their prospects. The pendulum has clearly swung over in the carriers’ direction. There have been very few new entrants to the business due the high cost of creating hub and spoke operations. The economies of the U.S. and Canada are strong. President Trump’s America First policy is viewed as a business-friendly strategy. With carriers maintaining capacity management and pricing discipline, and with significant barriers to entry, shippers need to optimize the management of their freight operations to keep their costs in line.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) LTL Freight Sat, 09 Jun 2018 18:41:05 +0000
Message to Prime Minister Trudeau: Respond to Trump’s Trade Sanctions by Hitting Him Where it Hurts https://www.dantranscon.com/index.php/blog/entry/message-to-prime-minister-trudeau-respond-to-trump-s-trade-sanctions-by-hitting-him-where-it-hurts https://www.dantranscon.com/index.php/blog/entry/message-to-prime-minister-trudeau-respond-to-trump-s-trade-sanctions-by-hitting-him-where-it-hurts b2ap3_thumbnail_dreamstime_l_111492678.jpg

This week President Trump imposed a 25% tariff on imported steel and a 10% tariff on imported aluminum products from Canada, Mexico, and the European Union. The rationale was that this was done for reasons of National Security. In view of the very modest size of Canada’s military and the longstanding, peaceful relationship between the two countries, this explanation is ludicrous.

We are also being led to believe that the President apparently took these actions to protect jobs in the steel and aluminum industries, to correct what he deems as unfair trade practices by other countries and to bully Canada and Mexico into making concessions on the new NAFTA agreement that has been under negotiation for many months. Again, these are weak reasons to damage the strongest trade relationship between any two nations in the world.

In the case of NAFTA, the most recent sticking point has become the “sunset clause.” Vice President Mike Pence advised Prime Minister Trudeau last week that he'd have to accept this clause, which would make the trade agreement subject to renegotiation every five years. Trudeau said he couldn't accept the terms. The sunset clause is just one sticking point. The U.S. is also seeking changes to the "rules of origin" that govern how much of a car must be manufactured in North American to avoid import taxes in the three countries that make up NAFTA.

As a Canadian businessperson, I have two messages for Prime Minister Trudeau, push back hard against these bullying tactics and hit President Trump where it hurts. As the world has seen, persuasion, charm, diplomacy, and logical reasoning don’t work with this president. The fact is that both French President Macron and German Chancellor Merkel, two long-time allies, went to the White House in recent weeks to reason with him. Their visits appear to have had no impact.

The fact that Canada is America’s largest trading partner and a loyal ally, that our servicemembers have fought shoulder to shoulder with U.S. military personnel in two world wars and the Korean War, that Canada is the largest foreign market for over 30 U.S. states, that millions of Canadians visit America every year and inject millions of dollars in the U.S. economy have had no influence. President Trump does not appear to distinguish between his allies and enemies. In fact, he has been more supportive of Russia rather than most of his allies.

As reported by Scott Gilmour in Maclean’s magazine, “the President can be successfully engaged, and countries like Ukraine, China, and Qatar have demonstrated this. When they want something from the United States, they skip the State Department, and even the White House staff. Instead of approaching their problem state-to-state, they go state-to-man. These countries focus on what Trump wants on a personal level – to enrich his family. So Beijing granted Ivanka trademarks, Qatar invested in one of Jared’s office towers, and Ukraine, with Slavic candor, simply wired half a million dollars to the President’s personal lawyer Michael Cohen . . . Other countries that have figured this out have begun to openly bribe the President to get the foreign policy decision they need.”

Prime Minister Trudeau, this is not how Canada works and no thought should be given to following in the footsteps of these countries. I cannot imagine that any Canadian citizen would want to see his or her tax dollars directed to making Trump and his family any wealthier. Forget it! Rather, we should take the opposite approach. We should hit president Trump where it hurts, with his personal and financial situation and with his base to whom he desperately tries to cater.  Mr. Gilmour makes the following argument.

“. . . instead of taxing the import of American serviettes, we tax Trump. In the spirit of the Magnitsky Act, Canada and the western allies come together to collectively pressure the only pain point that matters to this President: his family and their assets. This could take the form of special taxation on their current operations, freezing of assets, or even sanctions against senior staff. Canada could add a tax to Trump properties equal to any tariff unilaterally imposed by Washington. The European Union could revoke any travel visas for senior staff in the Trump organization. And the United Kingdom could temporarily close his golf course.

Arguably, the legislation to do so already exists. Canada’s Special Economic Measures Act and the Foreign Corrupt Officials Act permit us to sanction public officials who are “complicit in ordering, controlling or otherwise directing acts of corruption. In the case of Trump, we already have several open examples of this and the various ongoing criminal investigations (of his own government) are expected to produce many more . . ..” The question is whether the leaders of these countries have the courage to take these dramatic and unprecedented actions.

The other part of the exercise is to focus on those states that form a key part of his base. The Prime Minister Trudeau and Foreign Affairs Minister Freeland have clearly anticipated the action by Trump. Canada plans to impose tariffs on C$16.6 billion worth of US imports, including coffee, whiskey, orange juice, steel, aluminum, a variety of foodstuffs, hair products, insecticides, boats, tableware, matresses, sleeping bags, ballpoint pens and other products. To see the full list, click here (https://www.fin.gc.ca/activty/consult/cacsap-cmpcaa-eng.asp ). Canada’s leaders should take to the airwaves to communicate to Americans what the country is doing to respond to President Trump’s foolish actions.

Canada’s trade representatives should also push hard on the NAFTA front. After negotiating in good faith for many months, for Donald Trump to toss this grenade into the discussions, at this stage, is a disgrace. Maybe that is how he bought and sold real estate in the past, but this agreement will have major impacts on the future of the Canadian economy and on jobs in this country (and our two NAFTA partners). Our negotiators should bring even more resolve when the next round of negotiations take place.

Mr. Gilmour goes on to state the following. “The President of the United States is dismantling the entire liberal international order we have spent a century building, and he is completely focused on promoting his own interests, at the expense of American allies, and at the expense of Americans themselves.

Our attempts to use traditional diplomatic strategies to deal with this crisis are failing. If we do not ask ourselves now, 'How do we hurt Trump?', I predict we will reach that point in the not too distant future.”

It is difficult for me to write this blog. I love America. I have family, friends, and customers in the United States. This blog does not represent how I feel about America. It is about how I feel about what Donald Trump is doing to injure both Canada and the United States.

The imposition of the Trump tariffs is expected to cause a loss of jobs in America and Canada. Canadians should do their part to repudiate the Trump tariffs by buying Canadian or foreign goods rather than U.S. goods, wherever possible. Snowbirds should consider going to Mexico, the Caribbean or Central America until the sanctions are lifted.

The mid-term elections are fast approaching. The best ways for Canadians to hurt Donald Trump are in his pocketbook and with his base, and for Americans to express their disappointment at the ballot box. This Trump-induced trade dispute will likely end badly. At some point, after both countries display some financial pain, Trump will probably declare victory and start a new battle. In the meantime, Prime Minister Trudeau needs to punch back hard.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) NAFTA Sun, 03 Jun 2018 20:21:45 +0000
Some Business Lessons from the Amazing Vegas Golden Knights https://www.dantranscon.com/index.php/blog/entry/some-business-lessons-from-the-amazing-vegas-golden-knights https://www.dantranscon.com/index.php/blog/entry/some-business-lessons-from-the-amazing-vegas-golden-knights  

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While there are lots of great sports stories at this time of the year, the Vegas Golden Knights should rank at or near the top. Even if they don’t win another game this season, they have exceeded all expectations. They are currently among the two final teams battling for the Stanley Cup, an amazing accomplishment. While a number of other top professional hockey teams (the Penguins, Jets, Bruins, Predators, Leafs) have been eliminated, this first-year expansion team is still in the hunt. How do you explain this unprecedented success story?

Start with a Nucleus of Good People

The Golden Knights invested in good management talent. They hired a quality GM, good coaches, and support staff.

Create and Follow the Plan

They had a vision of how to build a new organization. Rather than look for “big name” castoffs at the end of their careers, they elected to recruit good, young, energetic players. While they selected an experienced top-quality goalie, one of the most important positions on any good hockey team, they surrounded him with a lot of young players with good potential from the draft and through trades.

Carefully Evaluate the Talent within your Organization

Most of the Golden Knights hockey players were not ranked among the top talent on their respective teams; they were deemed expendable in the draft. There are probably several red-faced general managers around the National Hockey League who are embarrassed that they made certain players available. Clearly these were players whose skills were underappreciated and undervalued. 

Talent evaluation is an important management skill.  Some people and some organizations have it while others are not as good.  In business there are a range of techniques one can use to evaluate talent.  Where does your organization rank in evaluating and recruiting top talent?  Clearly the management of the Vegas Golden Knights had choices  to make at and after the draft.  They clearly made good talent assessments.

Do you give your employees opportunities to demonstrate and develop their skills sets?

Good managers create opportunities for their top talent to learn other facets of the business, to take on tasks that permit growth and development, and to work with other people so they can evaluate their inter-personal and leadership skills. This is what good organizations do. Does yours? Clearly some NHL teams did not do as good a job in this area as the Golden Knights.

Does your organization employ managers who can develop the skills and talents of their employees?

Clearly the coaches of the Golden Knights introduced a system and got their players to buy into the system. They are playing like a team that has been around for years. For them to defeat teams as good as the Nashville Predators and Winnipeg Jets indicates that they have the discipline and structure to play as a unit at a high level. The coaches took an assortment of second or third tier hockey players and moulded them into a top-performing team.  Does your management team possess the skills to teach and motivate your employees to perform at a very high level?

Winning Breeds Poise, Confidence and Stability

Winning is a great motivator. It tells you that the steps you are taking are producing success. It reinforces good work habits, processes, and practices. Winning fosters more winning. Winning promotes poise and confidence among employees.

Losing organizations tend to look for scapegoats; they foster turnover and instability. They create mistrust and a lack of confidence within the organization? Should I “jump ship” now before the company goes out of business or before I take the blame for a poorly run organization?

I am cheering for the Vegas Golden Knights. I hope they can keep on winning. More importantly, I hope executives across North America are learning some valuable business lessons from their success. This is a business case that should be presented as an example of great leadership, management skills and employee development. Congratulations to the Vegas Golden Knights for a job well done.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Business Transformation Strategy Fri, 18 May 2018 20:40:58 +0000
An Action Plan to Optimize the Money Spent on Freight Transportation https://www.dantranscon.com/index.php/blog/entry/an-action-plan-to-optimize-the-money-spent-on-freight-transportation https://www.dantranscon.com/index.php/blog/entry/an-action-plan-to-optimize-the-money-spent-on-freight-transportation  

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In my last blog, I identified one of the recurring problems we encounter in working with shippers on a day to day basis, namely a lack of complete and accurate information on their freight transportation activities and expenses. I would argue that “you cannot manage what you cannot measure.” Good quality freight data is an essential component in the management of freight transportation.

Detailed, quality freight spend data can allow shippers to identify consolidation opportunities, to address chronic operational inefficiencies that result in excess or accessorial costs, to highlight “maverick” spend (e.g. higher cost carriers being used that are not listed in routing guide), to rectify the use of non-core carriers or more expensive modes and/or to create opportunities to construct more efficient routes and round trips. Shippers with poor quality and/or inaccurate freight cost data place themselves in a vulnerable position. Here are some steps that shippers can take to address this shortcoming and improve their profitability.

1. Build a Quality Freight Spend Data Base

The first step on the road to properly managing a company’s freight spend is to construct a complete, accurate data base. These are the key elements.

• Shipment pickup date

• Shipper name

• Origin postal code/zip code

• Origin city

• Origin province/state

• Shipment actual weight and billed weight

• Product descriptions (i.e. package or envelope)

• Total pieces

• Actual weight

• Billed weight

• Shipment delivery date

• Consignee name

• Destination city

• Destination province/state

• Destination postal code/zip code

• Mode

• Carrier

• Heated or Refrigerated Service

• Dry Van or Heavy Haul service

• Service Level provided (i.e. 9am, noon, next day etc.)

• Courier Rate Zones for pickup and delivery, if available

• Linehaul rate paid excluding fuel surcharge

• Fuel surcharge

• Other accessorial charges

Resist the temptation to combine modes (i.e. dedicated and private fleet) or rates (i.e. linehaul and fuel surcharges). Reducing the granularity of your data will limit your ability to identify cost saving opportunities. As part of this process, take stock of your company’s technology capabilities. If you have a multi-million dollar spend, build a business case to acquire a Transportation Management TMS) System.

2. Create a Freight Spend Budget

Enlist the support of your Finance and Transportation leadership teams. Incorporate the annual Business Plan into the Transportation Plan. Make sure the budget reflects any strategic initiatives. Build a budget that can be sorted by customer, by mode and by geographic area. Make sure that the data base captures last year’s data, the current year’s actual data and freight spend budget data. Build the budget from the ground up and top down and make sure that it reflects any business changes, carrier rate changes and/or modal shifts.

3. Manage your Freight Spend on a Scheduled Basis

Establish a schedule to distribute reports that display deviations to budget and to last year. The more frequent the reports, the quicker the potential response time. Set up a schedule of meetings with key stakeholders and engage them in a discussion of variances. Prepare minutes of meetings with action plans assigned to specific managers with designated, realistic timelines.

4. Follow-up on Action Plans

Follow up on the Action Plans to ensure that problems are resolved in a timely manner. Connect with operations personnel to drive changes in shipping errors. Speak with other departments to address changes in sales, inventory, and production policies that impact on freight costs. Keep a record of the issues that are addressed to make sure they don’t reoccur and track carrier rate increases, so they can be explained to higher management. This is a never-ending process. Creating and managing a tight process will have a direct result on your company’s bottom line.

 

If you need help in creating a freight transportation budget or in managing freight expenses, please contact me at dan@dantranscon.com. We have been in business for over 14 years and we would be happy to help you. To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Best Practices in Freight Management Fri, 11 May 2018 19:07:40 +0000
Manage your Freight Spend Data to Improve Your Profitability https://www.dantranscon.com/index.php/blog/entry/manage-your-freight-spend-data-to-improve-your-profitability https://www.dantranscon.com/index.php/blog/entry/manage-your-freight-spend-data-to-improve-your-profitability b2ap3_thumbnail_dreamstime_l_100942113.jpg

For the past 15 years, my colleagues and I have been working with shippers throughout North America to help them save money on freight transportation. In 2018, this cost has hit the radar screens of CEOs, as the tightness in freight capacity has placed upward pressure on freight rates. Many shippers have been experiencing rate increases in the high single digits and even double digits. Some CEOs have been highlighting the impact of freight costs during their quarterly investor calls and earnings reports.

A company’s freight costs often represent between two and ten percent of total revenues. For many companies in the manufacturing, distribution and retail sectors, their expenditures on freight have a direct and significant impact on their companies’ bottom lines.

Twelve years ago, I wrote a blog on this topic. In that blog, I identified one of the consistent problems we encounter in working with shippers on a day to day basis, namely a lack of complete and accurate information on their freight transportation activities. Twelve years later, this problem persists, and it is not limited to small companies. In fact, many companies with freight expenditures of five to fifty million dollars or more face the same problem.

“You can’t manage what you cannot measure.” Good quality freight data is an essential starting point in the management of freight transportation.

There are two sets of freight data. Operational data focuses on metrics such as on-time service, shipments per day, and claims ratios. Financial data addresses KPIs such as billing accuracy, cost per pound by mode, cost per shipment, and freight cost as a percent of revenue. In addition to the strong economy and tight capacity, there are several other issues that are having an impact on freight transportation expenditures.

First, there has been a considerable amount of industry rationalization. Here in Canada, large transportation organizations such as TFI and Manitoulin have purchased many carriers of all sizes in the parcel, less than truckload and truckload sectors. Some of these acquisitions have been merged together as numerous brand names and carrier choices have disappeared from the market. America has been going through the same process. Shippers now have fewer options and their negotiating power has been reduced.

Second, freight companies have become a lot smarter. Rather than going for market share, they are looking for profits. They evaluate shippers based on how well their businesses fit within their networks, the location of their vendors and customers, the ease of making pickups and deliveries and the quality of the head haul and back haul freight they have in those corridors. Shippers with the highest operating ratios receive preferred capacity allocations while less “carrier friendly” clients receive lesser or more inconsistent allocations. If shippers have poor practices that hinder the movement of their carriers’ assets, they are paying the price.

Third, carriers have figured out that if they use their scales and dimensioning devices, they can weigh and measure the freight they move more accurately. They are now charging more precisely and aggressively for the true cubic space occupied. As a result, carriers can and are securing revenue that they may have missed in the past.

What is interesting is that some shippers have high quality ERP and accounting systems. However, when they try to extract a year’s worth of freight transportation data, they receive files that are riddled with errors and omissions. What is even more disappointing is that many companies simply don’t know what they spend on freight or don’t seem to care.

Even after the years we have been in the business, and the articles we have written on this topic, we still find companies that have primarily an outbound transportation focus. Inbound freight costs are viewed as “free” since they are embedded in the landed cost of the products they receive from their vendors. This is a glaring omission and a significant lost cost saving opportunity.

Another comment we hear is that the company’s freight bills are audited by a freight audit company or by a knowledgeable resource within the company. If any discrepancies appear, they are addressed by one of these individuals. This is not what we see. A failure to manage a company’s freight spend can result in many missed opportunities to improve the company’s bottom line. Let me explain.

With good quality freight spend data, a shipper can identify:

• Variances to budget by mode or geographic area

• Opportunities to consolidate smaller shipments into larger lower cost shipments

• Carrier selection errors where small parcel shipments are moving with LTL carriers at LTL rates rather than with small parcel carriers at small parcel rates

• Carriers not supplying the levels of equipment that they contracted to provide resulting in the movement of loads by more expensive fleets

• Non-compliance with a company’s routing guide that could be costing the company many thousands of dollars

• Opportunities to take advantage of lead times to use less costly (intermodal) or alternate (standard ground versus expedited) transportation

• Recurring accessorial costs that can be reduced or eliminated through implementation of Best Practices

• Spot rates for recurring freight movements that should be under contract

• Carriers that don’t have the information management tools need to support their business

• Rate changes brought on by a reclassification of a commodity (due to a change in packaging, scaling or other reasons) rather than by a rate increase

• Core carriers that are providing transit times that are inferior to non-core carriers which can be used as leverage in rate negotiations

• Opportunities to quantify the precise financial impacts of changes in shipment measurements, freight rates and accessorial charges.

In other words, during this period of economic strength and tight capacity, many shippers are missing a range of opportunities to reduce their freight transportation expenses. What can a company do to fix this problem? Find out in the next blog.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Best Practices in Freight Management Sun, 06 May 2018 16:52:53 +0000
What are Trucking Companies Doing to Solve the Driver Shortage? https://www.dantranscon.com/index.php/blog/entry/what-are-trucking-companies-doing-to-solve-the-driver-shortage https://www.dantranscon.com/index.php/blog/entry/what-are-trucking-companies-doing-to-solve-the-driver-shortage b2ap3_thumbnail_dreamstime_l_72814907.jpg

Last week’s TruckWorld event at the International Centre in Toronto was a great opportunity to connect with old friends and get updated on the state of the freight transportation industry. It was clear from the huge attendance at the show that is a very good year to be in trucking. The negotiating leverage has clearly swung over to the carrier side. Shippers are being told to accept rate increases or risk losing their truck capacity to other manufacturers and distributors.

One trucking company owner summed up the state of the industry this way. The industry is facing four problems: drivers, drivers, drivers, and drivers. This caused me to reflect on what various trucking companies are doing to address this issue.

Signing Bonuses

Companies are offering from $2000 to $10,000 bonuses to experienced (one year plus) drivers.

Orientation Pay

During orientation, one company pays $1,000 to first-week solo drivers and another $1,000 the second week. The company also provides drivers with meals, a rental car for their comfort and convenience (in specific locations) and a single hotel room.

Base Pay

Truck drivers are being offered $0.50 per mile and up as base pay. In one company the pay program for linehaul drivers provides a guaranteed weekly gross minimum pay determined by their pay bracket. Drivers who earn 46-50 cents per mile are guaranteed $1,000 per week; those who earn 52 and 53 cents per mile are guaranteed $1,100 per week; and drivers earning 54-56 cents per mile are guaranteed $1,200 per week. In addition to the guaranteed weekly pay, the company prorates holiday weeks.

Pay Increases

Drivers at all experience levels can receive pay raises with as little as three months’ experience (a 2¢ per mile raise) to those with two years or more (a 5¢ per mile raise).  

Lifestyle Enhancements

Some companies will allow their drivers to bring along riders and pets, offer in-cab DirecTV, and/or they guarantee they will be home 3 of every 4 weekends.

Pay for Performance

Performance Bonus Pay is available in some companies and is based on achieving certain safety, fuel economy, miles driven, and/or on-time delivery KPIs. Performance bonusus may be paid monthly or quarterly.

Benefits

A variety of benefits are being made available including low cost medical, life, dental, and disability insurance, a 401K (RRSP in Canada) with company match, direct deposit, paid weigh station bypass and tolls, profit sharing, and/or paid vacations.

Referral Bonuses

This is another source of revenue made available to drivers who can encourage their experienced friends to join the team.

Summary

The driver shortage has certainly helped boost driver compensation which has been long overdue. To keep pace, some truck fleets are considering further double-digit driver pay increases later in the year. The common feeling is that this current capacity crunch is here to stay for another 18 to 24 months. Trucking companies need to adjust to the current realities of what it takes to recruit quality drivers and serve their customers.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Driver Shortage Sun, 22 Apr 2018 21:50:10 +0000
Time to Become a “Shipper of Choice” https://www.dantranscon.com/index.php/blog/entry/time-to-become-a-shipper-of-choice https://www.dantranscon.com/index.php/blog/entry/time-to-become-a-shipper-of-choice  

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In last week’s blog, I highlighted the tight freight capacity being experienced across North America (https://dantranscon.com/index.php/blog?view=entry&id=310 ), and that it is likely to continue for another year or two. For shippers that are experiencing shortages of trucking or rail equipment, there is a series of steps that need to be taken to prevent service failures and loss of market share. Here is a link to some blogs I wrote on this topic last summer (https://www.dantranscon.com/index.php/blog/entry/shippers-need-to-become-more-carrier-friendly-to-minimize-freight-rate-increases and https://www.dantranscon.com/index.php/blog/entry/two-keys-to-maintaining-truck-capacity-this-winter ).

The following are some additional steps to take to become a Preferred Shipper.

1. Integrate a Freight Transportation Strategy into the company’s Business Plan

For companies that have relied on rate quotes and sport market pricing, transition from a transactional to a strategic approach to freight transportation. Select a core group of carriers, negotiate and sign multi year agreements that include SLAs for price, service, and capacity. Keep an open mind on modal options. Meet with the leaders of these transportation organizations to ensure they can meet the stated requirements in all three areas. Before awarding freight to these companies, test them over time to verify that they can meet their commitments.

2. Provide Carriers with Shipping Forecasts

Share information with carriers on shipping characteristics, freight flows, and seasonal fluctuations. Notify carriers of peaks and valleys and variances in equipment requirements.

3. Work with Core Carriers to Remove Inefficiencies and Costs

Meet with these core carriers and openly discuss all elements of the company’s freight operations. Can the company be flexible with pickup and delivery times? Can drivers work with the dock schedule? Is there anything that can be done to have the freight and paperwork available more quickly? Are there lines of trucks in front of the company’s facilities on a regular basis causing delays and lost driver time? Does it take more than 45 minutes to load a truck from gate in to gate out? Is a drop trailer program required? Are drivers penalized by requiring them to pay a fine on the spot for a service failure they did not cause?

4. Speak with Partners to Remove Roadblocks at the Receiving Dock

Speak with the transportation companies serving the business and obtain frank and complete information on the process of delivering freight to customers. Speak with and if necessary, visit with customers, stores, merchants, replenishment teams and other partners to remove roadblocks. Follow up with the core carriers to verify that that the requested changes have been made.

5. Document SOPs for these Cost Saving Processes and Maintain a Dialogue with Core Carriers

Don’t view this exercise as a “one shot” project. View this as an ongoing effort at establishing Best Practices. Remember that there is a shortage of drivers and equipment. Carriers have choices and are selecting “Shippers of Choice” that operate at the lowest cost and pay the highest price. Rate increases can be mitigated through cost efficiencies and by ensuring the fluid movement of drivers and equipment.

6. Create and Sustain a “Shipper of Choice” Culture

Treat dispatchers, sales reps, drivers, and customer service personnel with respect. Be fair and reasonable in the demands placed on these partners. Ask for feedback from transport companies and take corrective action to address unprofessional behavior.

These are unique times. Shippers that make the necessary strategic, tactical, and cultural changes are likely to secure the capacity they need.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Shipper-Carrier Collaboration Sun, 15 Apr 2018 23:19:54 +0000
The Freight Market is Hot and it is Going to get Hotter https://www.dantranscon.com/index.php/blog/entry/the-freight-market-is-hot-and-it-is-going-to-get-hotter https://www.dantranscon.com/index.php/blog/entry/the-freight-market-is-hot-and-it-is-going-to-get-hotter b2ap3_thumbnail_dreamstime_l_86157039V2.jpg

North American freight markets are witnessing the strongest demand for transportation services in decades. Contract and spot freight rates continue to soar. The contract rate average revenue per mile rose 3.5 percent in 2017. Through the first two months of this year, contract truckload freight rates have jumped 15 percent per mile! “We’ve never seen numbers like this,” according to Bob Costello, the American Trucking Associations’ chief economist. So far in 2018, the total number of loads is up 5.4 percent compared with the same period a year ago.

Supply chains are also changing. The number of miles driven per load continues to decrease for full truckload carriers. The average miles driven per haul in the United States fell 34 percent last year to 524 miles, down from nearly 800 miles about 15 years ago. A changing supply chain is behind the decline, Costello said. Online and big box retailers have increased their number of distribution centers across the country, shortening distances for deliveries. The number of miles truckers are driving annually also has fallen and now stands at about 100,000, roughly 35,000 miles less than 15 years ago. Sales of trucks in the heaviest Class 8 weight segment continue to be strong as demand grows from both leasing companies and motor carriers.

CEOs are taking notice and are highlighting the impact of freight costs on their financial results. What are the drivers of this rapid escalation in freight rates? The industry is benefitting from low unemployment, booming housing starts and strong online sales growth, according to Mr. Costello. America is still feeling the impact of the three hurricanes last year and the difficult winter storms.

Truck fleets are also having difficulty supplying the needed capacity. Market demand indices show that capacity is very tight. The load to truck ratio in most parts of the United States is at a very robust 5.5. loads per piece of equipment. There are 10 flatbed loads for every flatbed driver. The impact of the ELD mandate has also contributed to driver shortages. The ELD mandate has increased the time to move loads from 1.05 days to 1.22 days on loads traveling 450 to 550 miles. Trucking companies are not expanding their fleet sizes since they cannot find drivers to fill their trucks. Even with the significant increases in driver pay, trucking networks are 100% full or higher. Truck fleets are allocating their precious assets to shippers that have speedy pick up and delivery requirements and pay compensatory rates.

The railways are not able to provide relief to shippers. Service problems have increased turnaround times on equipment by about ten percent. It currently takes 15.5 days to turn a box; normally there is a 14 day turn on intermodal equipment. Where do we go from here?

Expectations are that these conditions will continue through next year and possibly into 2020. The budget passed by the President and U.S. Congress is having a stimulative effect. GDP projections for next year surpass this year's strong numbers.

There are expectations that a new NAFTA agreement, at least agreement on a set of principles, that will drive the completion of a full agreement, may be in the works for May of this year.  “NAFTA trade is hugely important to trucking,” stated Mr. Costello. The majority of goods going across the Canadian and Mexican borders are moved by truck. NAFTA trade supports about $6.6 billion U.S. per year in revenue for the trucking industry and supports about 31,000 truck driver jobs annually. A new NAFTA deal would be very uplifting to shippers and carriers in the three countries.

U.S. officials are in the process of enforcing the utilization of electronic logging devices in America. One can expect some further erosion of truck capacity over the next few months. It has been a wild drive so far this year and it is likely to get wilder. In the next blog I will outline some strategies that shippers can employ to ensure they have the capacity to meet their needs.

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Economy Mon, 09 Apr 2018 20:04:02 +0000
Lessons Learned from the ELD Mandate https://www.dantranscon.com/index.php/blog/entry/lessons-learned-from-the-eld-mandate https://www.dantranscon.com/index.php/blog/entry/lessons-learned-from-the-eld-mandate  

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Under the Federal Motor Carrier Safety Administration rules in the United States, that came into effect on Dec. 18, 2017, most trucks built after 2000 had to be equipped with an ELD (Electronic Logging Device). Fleets already using older electronic onboard recorders are grandfathered until December 2019.

The CCMTA (Canadian Council of Motor Transport Administrators) is coming forward with a Canadian ELD Mandate proposal. The Canadian ELD rules will closely mirror the US mandate to keep cross-border regulations consistent.

Regardless of when the Canadian government publishes the final rule on ELDs, which will likely be within the next year, any driver operating a commercial motor vehicle south of the border is already required to follow U.S. Hours of Service rules and regulations. Canadian carriers that make cross-border deliveries were also required to have an ELD solution by the December 2017 deadline.

Shippers and Carriers have now had a couple of months to digest the impacts of the ELD mandate. These are some of the lessons learned.

1. Shippers Need to Address Obstacles or Pay the Price

The strict observance of the HOS rules legally affects a driver’s freight delivery schedule. ELDs provide carriers with quality data on the activities of their drivers throughout their working day.

Shipper/receiver docks will play a big role in keeping drivers on time. With truck idle time being captured by ELDs, it will quickly become clear who the culprits are in making drivers wait. Shippers should stick to appointment times, preload trailers, and take other steps to make drivers more efficient.

ELDs highlight the location of problem shippers and provide direction to sales personnel to educate customers on lengths of haul and pick-up and delivery requirements. This includes issues such as dock doors and parking spaces.

Shippers are encouraged to expand their hours of operation. A couple of hours on either end of the current hours could make a difference in terms of ability to receive freight on time and keep detention charges to a minimum. Adding some flexibility on pickup and delivery times can also be helpful. The ELD mandate has heightened the requirement for shipper-carrier communication and collaboration. Shippers that don’t fix their freight management processes will face documented charges.

2. Load Planners and Shippers need to Improve their Planning

Load planners need to work closely with shippers to be clear as to which delivery to take next and to ensure that that the next load is ready for pick up or delivery in a very timely manner. As highlighted in a previous blog (https://www.dantranscon.com/index.php/blog?view=entry&id=307 ), the industry needs to move to precision trucking. The era when a driver arrives at a distribution centre after a long haul run and must wait until their load planner decides which delivery to take next cannot persist into the future. Load planners must be “planners,” not reactors.

3. Be Knowledgeable on One and Two-Day Freight Movements

With the ELD mandate, load planners need to look for either one-day freight moves of a maximum length of 500 miles or two-day freight moves that reach up to 1,000 miles. Truckers need to think through their plans for loads moving 600 to 700-mile length of haul in terms of service commitments and rates. This has implications for sales, pricing, operations and for shippers that move freight in corridors of this length.

4. Expand the Routing Guide Carriers are adapting to the ELD mandate

This includes demarketing freight on certain lengths of haul or dropping uncollaborative shippers. With tight capacity, carriers are allocating their trucks to the loads that best fit within their operations and pay the best rates. To protect themselves, shippers need to have frank discussions on capacity and rates with their core carriers and bolster their routing guides with other players that can effectively serve their companies.

Freight brokers often have access to small, less well-know carriers that some shippers may not be aware of. Smart shippers should keep some freight brokers as options on lanes where there are challenges in finding capacity.

5. Consider alternate Modes

There may be times where HOS rules preclude a truckload movement on certain corridors on certain dates. The shipper may need to consider maintaining LTL providers in their routing guides in some situations. In other cases where the shipper has more flexibility in terms of transit time, intermodal service may be an option.

6. Use a TMS for Load Tendering

All transportation providers and their rates can be entered into a shipper’s Transportation Management System (TMS). Using a TMS, shippers can select carriers on certain lanes and use sequential tendering to find the best service in tight capacity conditions. In these strong economic times, shippers cannot afford to spend their days on the phone searching for carriers.

7. Make Contractual Commitments based on Service, Capacity and Rates

Shippers should work with carriers on commitments based on a combination capacity, service, and rates. Sign multi-year contracts to lock in these commitments. Shippers should go to the spot market for the remainder of their loads, as a last resort. Without commitments on a substantial percentage of the volume, shippers could run short on capacity at critical times and/or pay some very steep spot market rates.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Best Practices in Freight Management Sun, 25 Feb 2018 18:51:49 +0000
Conducting a Transportation Audit can help companies Improve their Bottom Lines https://www.dantranscon.com/index.php/blog/entry/conducting-a-transportation-audit-can-help-companies-improve-their-bottom-lines https://www.dantranscon.com/index.php/blog/entry/conducting-a-transportation-audit-can-help-companies-improve-their-bottom-lines b2ap3_thumbnail_dreamstime_l_26568438.jpg

This is a year that shippers have been dreading. Increased demand, from retailers looking to restock after the holidays and from manufacturers, has made it harder for companies to book transportation, particularly on short notice. Prices have also risen due to bad weather, a new U.S. federal trucking safety rule, truck and driver shortages and diesel prices that are around a three-year high. For shippers that play the spot market, double digit rate increases are becoming the norm.

This was the subject of a feature story in a recent issue of the Wall Street Journal (https://www.wsj.com/articles/rising-freight-costs-are-weighing-on-companies-profits-1517521490 ). A number of U.S. companies told investors that rising shipping costs in recent months have cut into earnings. Many manufacturers and retailers throughout North America spend millions of dollars a year on freight transportation.

Freight costs can represent between 1 and 10 percent of a company’s operating revenue, one of the largest cost items. Unfortunately, they are often treated as just a cost of doing business. From time to time a shipper may try out a new mode of transport, a new carrier or conduct a freight bid. Other than that, freight programs tend to remain fairly static from year to year.

During our years of consulting with shippers all over North America, we have observed a pattern of Best Practices that elevate certain shippers and companies above their peers. Employing these Best Practices allow these companies to reduce freight costs and improve profitability. One of the best ways to find out where a company stands in this area of rising freight rates is to conduct a Transportation Audit.

It is our view that shippers with an annual freight budget in excess of $1 million should periodically conduct an independent audit of their freight programs. Just as businesses audit their accounting practices, looking for opportunities for improvement, supply chain leaders should periodically audit their freight transportation processes. You might be amazed at what you find.

Note that a Transportation Audit is far more than a freight rate audit that seeks to identify where a shipper is being overcharged or incorrectly charged by transport companies. A Transportation Audit takes a holistic look at a company’s entire freight management program. The following items are typically included in one of these exercises.

Freight Data Management – Does the company have the quality and quantity of the data necessary to effectively manage freight transportation?

Knowledge – Does the shipper possess an understanding of the various disciplines (e.g. pricing, modes, carriers, customs, laws etc.) associated with freight transportation?

Organization – Is there a freight transportation leader within the organization, does the leader possess the appropriate skill sets to drive efficiencies in freight transportation, where does managing freight transportation fit within the company and how efficiently and effectively is it led and managed?

Freight Spend Management – Is there a detailed freight transportation budget, are variances between actuals and budget tracked, and are exception reports produced and acted upon?

Process – Does the company employ Best in Class processes to drive its freight transportation operations? What are the links between inbound and outbound freight? Does the company have Best in Class processes to procure carriers and rates?

Technology – Is Technology used to optimize the efficiency of key facets of transportation? Is it used for planning, execution, and management?

Strategy – Is the company’s Supply Chain and Transportation Strategy properly aligned with the company’s Business Strategy? Is the business’ transportation strategy aligned effectively with the company’s eCommerce strategy?

Key Performance Indicators and Reports – Does the company have relevant KPIs to manage freight transportation and does it have Dashboards and Scorecards that provide alerts and drive performance? Does someone monitor the KPIs and act when there are negative variances?

Carrier-Friendliness – In this era of tight capacity, does the company have strong relationships and collaborative business practices with its core carriers?

Network Optimization – Is the company using the optimum mix of for-hire, dedicated and private fleet services? Does it consolidate shipments and use the lowest cost modes, when feasible?

Operational Excellence – Are the basic “blocking and tackling” aspects of freight management (e.g. packaging, loading, unloading, private fleet operation) performed at a high level? Does the company’s supply chain provide competitive differentiation in the market?

Summary

Keep in mind that even a few percentage points of savings off a multi million freight spend can be a considerable amount of money.  A Transportation Audit can put some much needed dollars back on your company's bottom line.

 

If you need help in conducting a Transportation Audit, please contact us at info@dantranscon.com. To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Transportation Audit Tue, 13 Feb 2018 19:34:43 +0000
Will the ELD Mandate trigger a move to Precision Trucking and Increased Profitability? https://www.dantranscon.com/index.php/blog/entry/will-the-eld-mandate-trigger-a-move-to-precision-trucking-and-increased-profitability https://www.dantranscon.com/index.php/blog/entry/will-the-eld-mandate-trigger-a-move-to-precision-trucking-and-increased-profitability  

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The implementation of the FMCSA’s ELD mandate in the United States on December 18 was one of the most anticipated milestones in the history of trucking. The introduction of electronic logging devices is the latest attempt by the FMCSA to improve road safety and minimize road accidents in the United States. Driver fatigue is believed to be the biggest cause of road accidents. The FMCSA had previously specified Hours of Service (HOS) rules and regulations that limit how many hours a driver can drive in a day.

However, the problem is that Hours of Service were recorded with paper logs and, therefore, could be easily manipulated and falsified. ELDs are designed to eliminate paper logs and record driver duty statuses and HOS information automatically. Moreover, they are supposed to be tamper-resistant, so the recorded information cannot be altered by anyone.

Late last year, pre-mandate, the smaller fleets were wary of the decrease in miles per day and thereby the reduction in their profit margins. The word on the street was that there would be an exodus of smaller trucking companies when the regulations came into force.

Six weeks into the mandate, the apprehension has gradually died down, and the utilization rate has increased. Kevin Hill, founder of CarrierLists (https://www.carrierlists.com/eld-survey), conducts a weekly survey on ELD acceptance levels. The compliance rates have been going up steadily since the mandate. Hill’s survey this week across hundreds of carriers, has spiked seventeen points from last week to 94%. Over the past three weeks fleets running below 15 tractors have 80% compliance rates, while fleets operating over 15 trucks are at 91%.

As truckers gain expertise in managing their ELD equipped fleets, they are coming to an important realization. In addition to the benefits of the ELD mandate on safety, they are learning about the opportunities to improve their bottom lines. These opportunities lie within the massive amounts of data that is being gathered. Whether you're a driver, an owner-operator, a fleet owner, a carrier, a shipper, a 3PL, or an insurance provider, there are emerging ways to use ELD data to manage their businesses more effectively.

ELD data can be a powerful planning tool whether the clock is running or not. The devices provide insightful and fact-based information on a company’s customers. They highlight shippers where there are delays at loading and unloading points. The data can capture the lowest and highest places of detention. For truckload carriers that move a lot of multi-stop loads, ELDs provide a fact-based focus as to which shippers and receivers are penalizing driver effectiveness, service levels and bottom lines. They can help truckers improve the utilization of their fleets and optimize their routes.

Drivers experience an average of 7 detentions per month. Driver detention has been a cause for hand-wringing and complaints whenever capacity tightened in the past. Now it's time to recognize it as an opportunity. ELDs can provide truckers with quality data that can be shared with customers to negotiate freight rates more effectively. Everyone gains if the driver’s day becomes more efficient. ELDs can identify a company’s most and least efficient lanes. They display which lanes have the highest dwell times between deliveries and which drivers, trucks, and trailers are most productive. Shipments in the 500-700 range that would normally be run in one day, with minor adjustments, may have to be done in two days. Freight rates may need to be adjusted depending on whether a load falls within a one day or two-day delivery interval.

Summary

Although we are only six weeks into the ELD mandated era, truckers are learning that the data generated by these devices, if used effectively, can help them manage their fleets and operations with greater precision than in the past. They can identify shippers with poor freight practices and show them, with hard data, the impact that they are having on the productivity and financial success of their supply chains. While this may come as unpleasant medicine to some companies, knowledge is power. This valuable data may make change the perceptions of ELDs as profitability improvement rather than productivity killing devices.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Truckload Transportation Tue, 06 Feb 2018 16:03:44 +0000
Freightcom has found a “Sweet Spot” in the LTL Freight Industry https://www.dantranscon.com/index.php/blog/entry/freightcom-has-found-a-sweet-spot-in-the-ltl-freight-industry https://www.dantranscon.com/index.php/blog/entry/freightcom-has-found-a-sweet-spot-in-the-ltl-freight-industry b2ap3_thumbnail_FreightCom-logo-stacked.jpg

From time to time, I come across companies that offer a unique blend of freight transportation services and technological capabilities. I have written about several of these companies over the last decade. Freightcom (www.freightcom.com) is one of these companies.

The Freightcom Growth Story

The company was founded in 2010. The founders brought many years of freight experience into the business. They established Freightcom with a vision that there had to be a better way to book an LTL or small parcel shipment. It was their experience that the entire process of calling a carrier, obtaining a rate, and booking a shipment was too slow, too difficult, and too complex. They believed that if they could simplify the process for shippers and carriers, they could fill a void in the market and create a significant business.

One of the interesting aspects of the Freightcom story is that they resisted the temptation of many entrepreneurs to build a product and rush to market. In fact, the leaders of the business take pride in the fact that they grew the business slowly and methodically. They purposely “stayed under the radar” as the business expanded. Throughout the process, they refined their service with a combination of freight transportation acumen and technological sophistication.

Target Markets

“Freightcom decided to focus on the small parcel and low volume LTL sectors,” stated Tony Kermally, president of Freightcom. “Having identified our target markets, we brought in IT resources to create an extremely simple but deceptively functional and pleasant shipping experience. We enhanced our value proposition by selecting quality carrier partners that serve every postal code and zip code in North America.”

Over the past 3 years, the company focused on excelling at the carrier onboarding/integration process. Some of America’s leading carriers such as UPS, FedEx Freight, Purolator, TST Overland Express, CCT, and Day & Ross are among the pool of transportation companies that have partnered with Freightcom and have allowed them to become an authorized reseller of their services. Canadian and American manufacturers and distributors can ship their products domestically within and/or between all points in the two countries.

North American Coverage/Local Presence

Another unique feature of Freightcom is the range of local offices that it is creating. The company has a plan to create a local (physical) presence in many major North American markets. Freightcom’s personnel receive extensive training in every customer facing position including sales. The reps can go out and meet customers, help understand their problems, confirm with them that they are there for them and provide a level of human interaction when needed.

A powerful blend of Technology and Transportation

A shipper can go into their extremely user-friendly website and enter their origin and destination points, the weight and dimensions of their freight and other relevant (i.e. tailgate, residential delivery) information. The system then accesses the carriers in the data base that serve these points and supplies a set of service providers, rates, and transit times. The user compares service levels and rates, selects its carriers of choice, books the shipments and the system does all the rest. Through links with its core carriers, full track and trace capabilities are available as is the ability to print PODs.

Freightcom is very proud of its IT infrastructure, believing that it differentiates them from the competition. Through a very clean and functional user interface, a shipper can shop, price, and book their shipments within seconds. The company will be launching its new website in the coming weeks.

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Leading Edge LTL Transportation

Freightcom has some exciting plans to extend their business model.

a) Integratedfreight.com

Freightcom is releasing www.integratedfreight.com According to Mr. Kermally, “the vision with this new initiative is to provide a fully comprehensive solution for users and carriers in the transportation industry. By leveraging their cutting-edge IT knowledge and resources, this new offering will bring a more collaborative and streamlined approach to shipping. This portal will also allow a simplified integration process into Freightcom’s rating engine.”

b) Building ecommerce platforms for customers

Freightcom has also released its first eCommerce application. Currently it integrates directly with Shopify Users; the application has been built to streamline the shipping process for eCommerce users. Not only does the application provide discounted rates and allow the store owner to ship instantly within a few clicks, it also has an algorithm built in, which they call BestBox, that provides the best rate for shipments based on the package type.  It also provides rates based on dimensional weight.

The business is experiencing rapid growth

Freightcom has been achieving double digit growth year after year. To maintain their growth trajectory, the company is constantly looking for user feedback to enhance the service. Small shippers receive the continuously upgraded technology online and all updates are free of charge.

Freightcom has a bright future

The company’s unique blend of transportation expertise, market focus and superior technology are propelling the company’s growth in their two target markets. By affiliating with industry leading small parcel and LTL carriers, by providing a high level of human interaction, when needed, and by a commitment to continuous improvement, they have established a very solid platform. With a range of new services that are in the process of being introduced, they are poised for rapid growth.

 

Do you have a great Freight Transportation story to tell?  Contact me at dan@dantranscon.com. To stay up to date on  Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) LTL Freight Fri, 26 Jan 2018 17:38:29 +0000
Tips for a New Transportation Sales Rep and Sales Manager https://www.dantranscon.com/index.php/blog/entry/tips-for-a-new-transportation-sales-rep-and-sales-manager https://www.dantranscon.com/index.php/blog/entry/tips-for-a-new-transportation-sales-rep-and-sales-manager b2ap3_thumbnail_dreamstime_l_60927070.jpg

Five years ago, I posted a blog that was derived from a LinkedIn Sales Management Group. A range of people responded to the question, “What advice would you give a new salesperson?” To that list, I added my own observations.

While many sales techniques stand the test of time, others evolve based on changes in technology and culture. This updated list of tips is designed for two sets of users, new reps, and their managers.

1. Achieve mastery of the services that you sell and understand how your services compare with those of your competitors.

2. Achieve mastery in sales skills. Observe how top sales people perform their craft. Seek out constructive feedback on your sales skills. Work on those areas of your sales skills that need improvement.

3. Achieve mastery of the technological tools that can help you perform prospecting, sales, and account management. Learn how to use your CRM (customer relationship management) software and make it a part of your daily routines.

4. Seek out the top performers on your sales team and learn from them as to how they dress, their work ethic and their communication skills

5. Measure every element of the sales process (i.e. leads generated, leads converted to prospects, prospects converted into customers). Compare your KPI results to other top performers and then create action plans to achieve superior scores.

6. Set daily, weekly, monthly, and quarterly goals for yourself and measure yourself constantly against these goals.

7. Be a great listener so you understand the needs of your prospects. There is a good reason why we have two ears and one mouth. Focus on understanding the needs of your customers so you solve their problems.

8. Focus on identifying your prospects’ “pain points,” even if it is just a lane or mode and then try to solve that problem first. This will give you and your company credibility that you can build on over time.

9. Speak your customer’s language. Understand your customers’ businesses and how freight transportation fits into their businesses. What can you do to make your customers’ businesses more successful?

10. Get to know your prospects before you turn them into customers.

11. People buy from people, specifically people they like and trust.

12. Prospect, prospect, prospect. Keep your sales pipeline full so you can grow your revenues.

13. Create a strategy to obtain face time with your prospects. We live in the era of voicemail, text messaging, e mails and the disappearance of receptionists. Learn how to combine knowledge of your prospects and what they are doing with a compelling value proposition to get in the door. Practice makes perfect. You need to make a strong first impression every time.

14. Learn as much as possible about your customers’ businesses. The more due diligence you do up front, the easier it will be to close the sale at the end.

15. Be persistent and consistent. Success comes from a strong work ethic. Don’t give up. Yes, there are hurdles and obstacles, but every shipper must move his/her freight and that freight is moving with one or more transportation companies.

16. Be proud and passionate about your company and its services. If you don’t have confidence in the freight services you sell, you should provide feedback to your supervisor and operations. If service problems are not fixed, it may be time to find a better company to work for.

17. Try to sell solutions rather than products or services. Learn your company’s value proposition and where it fits best. Sell the value of your solution, not price.

18. As more transportation companies extend their service offerings (by adding truckload and/or intermodal and/or last mile delivery) to their portfolios, learn how to mix and match services to meet the unique needs of your customers.

19. Learn early on to distinguish buyers from non-buyers (i.e. lack of mutual fit/interest/resources, etc.). This will go a long way towards increasing your income and your employer’s income while reducing customer acquisition costs.

20. View yourself as a profit center. To be successful, time management is critical. Spend your time, energy and resources on the most viable opportunities in your sales pipeline.

21. Be ethical in all of your business dealings. You are selling your (and your company’s) credibility and integrity. If you lose your integrity, you have nothing to sell.

22. Invest in yourself. Continually upgrade your product and business knowledge and your sales skills.

23. At the end of the day, when all of the other sales reps have left the office, make one more call to a new prospect.

24. Make intelligent use of social media. Join groups that can help you and your career. Be very careful in how you communicate online. Never be abusive or insulting. Be very pragmatic and judicious in your use of social media. Participation can be addictive, time-consuming and unproductive. Learn which media help you achieve results and shift away from those that consume your time and energy but produce no revenue.

25. If you are having difficulty in one or more areas of your sales pipeline, this is telling you that you have a weakness in specific areas (e.g. prospecting, obtaining appointments, asking for the sale). Take action to turn these weaknesses into strengths.

26. While the sales job can seem very lonely at times, don’t forget it is a team sport. Work closely with your manager and the rest of your team (e.g. drivers, dispatchers) to achieve your goals.

27. Always ask for the business. If you don’t ask, you may not get.

28. Spend time with drivers. If you sell small parcel or LTL services, get out with your route driver (s). Get out of the truck and see how your freight is picked up and delivered. Look at the paperwork, the availability of dock doors, how your freight is packaged and whether your freight is ready on time. Find out the true impacts of ELDs and capacity shortages. This time will help you be much more effective in doing your job.

29. Invest in your appearance. Your clothes and grooming say a lot about you.

30. There are successful sales reps who are introverts and extroverts. Be sincere. Be yourself.

I am sure there are many more tips that can be added to the list. What advice would you give to a new freight transportation sales rep?  Please share your thoughts with the readers of this blog

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Transportation Sales Management Sun, 21 Jan 2018 17:29:39 +0000
Trying to Solve the Driver Shortage? - Try Paying them a Salary https://www.dantranscon.com/index.php/blog/entry/trying-to-solve-the-driver-shortage-try-paying-them-a-salary https://www.dantranscon.com/index.php/blog/entry/trying-to-solve-the-driver-shortage-try-paying-them-a-salary  

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Recruiting and retaining qualified drivers has been a challenge for several years. Many young people do not wish to spend so many hours away from friends and family. The Hours of Service and ELD mandates make the job more difficult from a work enjoyment and compensation perspective. They cap the number of hours a driver can work and thereby limit their incomes. As the U.S. government ramps up its ELD enforcement efforts, this will likely encourage some drivers to find another source of employment.

The strength of the U.S. and Canadian economies is placing pressure on the limited supply of drivers. Employment levels in America are at record highs. Two sectors of the economy that serve as alternate sources of employment for drivers are manufacturing and construction. Both areas are also on a growth spurt. The rebuilding efforts after the two major hurricanes in the southern U.S. have provided an added boost in demand for people willing to work in construction.

The driver shortage problem in North America has been studied for years. “Blue ribbon panels” have been created to find solutions to this chronic problem. Some of the challenges are well known.

While lip service has been paid to the need to treat drivers as professionals and truck driving as a profession, the reality is somewhat different. It is a challenge to earn a good, consistent living as a truck driver. Truck driving has historically been a low-paying job.

Most truckload drivers are paid on a per mile basis. Their productivity is constrained by inconsistency in their workloads, by the HOS and ELD mandates, by un-cooperative shippers and receivers, by weather-related challenges, by failing infrastructure and by the management at their employers. Drivers wish to support themselves and their families but the nature of their work and compensation structure creates an element of uncertainty and stress. Annual driver turnover for truckload fleets has been averaging one hundred percent for several years.

Truckload carriers have taken various approaches to addressing these issues. Pay increases, signing bonuses, showers, fitness rooms and big screen TVs in trucking company terminals are some of the measures that have been employed. The fact is that we still have a driver shortage problem. As we move to self-driving vehicles, this problem may dissipate but this development, on a large scale, is still years away. So, what can trucking-company owners do now?

Well, how about paying at least some of your drivers a salary? When you think about it, drivers are employed to move revenue-producing loads from one point to another. These loads are “revenue on wheels.” Most truckload carriers have a core group of customers for whom they move a core group of loads every week. Why not pay a core group of drivers a salary to move these loads?

The counterargument has always been that this is not financially practical. How you can pay a driver for non-productive time? How can you afford to pay a driver who is stuck on the highway or who is waiting in a shipper’s yard to pick up or deliver his/her load?

Here is something to think about. Many truckload carriers employ salespeople. Many of these salespeople earn a salary or salary plus commission. Are these reps generating revenue all day long? Do they ever get stuck in traffic? Do they maintain or secure revenue on every sales call? Despite their best or less than best efforts, do they ever lose an account? Are they generating revenue when they are filling out their sales reports or sitting in their weekly sales meetings?

Truck drivers are “revenue movers.” Sales reps are “revenue managers.” Many trucking companies have a core group of senior or National Account reps who manage their core accounts. Should the truck drivers who service the loads of these core accounts be treated differently from the sales people who manage the accounts?

Why not pay your top truck drivers a salary or even better, a salary plus bonus based on a set of performance based KPIs? Just as there are different compensation formulas for sales people, there can be different compensation structures for drivers. For non-core customers, sporadic shippers, or companies that have a more variable volume of business, why not pay those drivers using another formula? The traditional revenue per mile or a low base pay/higher variable structure may still work for some portion of your driver force.

The idea is that the salary concept allows you to send your drivers a message. Your company is trying to find a way to tell these very important employees who are valued. Your company is trying to think “out of the box” to compensate them for their value, performance, and loyalty.

Of course, the salary or salary plus bonus, as a percent of revenue, must still allow the trucking company to earn a profit. Providing a driver with a salary provides them with the income consistency that they are seeking. It makes truck driving a “profession” similar to other professions.

Adding a variable cost KPI component provides the driver with incentives to meet several company requirements in terms of safety, on-time service, loads delivered per week, customer satisfaction etc. It provides you with a tool to retain your best drivers rather paying them a formula that encourages them to leave. Part of the variable compensation could be tied to the profitability of the account. If better service translates into a higher rate increase and a higher OR on the account, why not let the driver share in the results of his/her work that is being recognized by the customer. In other words, why not create an alignment between your most valuable drivers and your most valuable customers?

In conclusion, driver retention is a challenge. The purpose of this blog is to challenge you to think about what your company can do to tune in to the needs of your drivers and find a way to retain a higher percentage of the high-quality professionals who are essential to your business success. Please tell me what you think.

 

To stay up to date on Best Practices in Freight Management, follow me on Twitter @DanGoodwill, join the Freight Management Best Practices group on LinkedIn and subscribe to Dan’s Transportation Newspaper (http://paper.li/DanGoodwill/1342211466).


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dan@dantranscon.com (Dan Goodwill) Driver Shortage Sat, 13 Jan 2018 21:22:23 +0000