E-commerce purchases make up 5 percent of Sales in the United States and about 3.4 percent in Canada. These relatively small percentages may cause retailers and trucking companies to downplay the role that e-commerce is having and will have on this sector on this sector. This would be a huge mistake.

Dramatic changes are coming to almost all facets of the retail sector. In the home entertainment and book distribution segment, retailers are changing product lines and the customer buying process experience. A trip to the local Chapters or Indigo store will open your eyes to the types of transformations under way. As online music sales have escalated in recent years, CDs have been almost totally removed from store shelves and books constitute a much lower percentage of the floor space. In their place, you will find dolls, toys, gifts, glassware, e-readers and tablets, blankets and a host of other items. Since so many Dell computers and other high tech products have been purchased online for the past 20 years, consumers are very confident in buying products in this manner.

A visit to the local Loblaw’s store will highlight a much larger footprint and a greatly expanded product line. Take-out meals, sushi counters, organic and non-organic food counters, in-house restaurants and a host of other changes have greatly expanded the size of these giant stores. Staples, Toys “R” Us and Best Buy Co. Inc. are shrinking their store space, expanding stock rooms for e-commerce distribution or shutting certain outlets. Toys “R” Us is converting more store space to backrooms to fulfill its growing number of online purchases. Later this year it will begin allowing customers to pick up their online orders at its stores.

Meanwhile in the United States, Amazon is investing in distribution centres in the major markets so it can provide same day delivery to its customers. This will allow them to take direct aim at a range of retailers in these markets. As they increase their e-commerce business, they will continue to draw more business away from traditional retailers.

Retailers are scratching their heads as to the appropriate footprints for their stores, the correct assortment of products, the marketing approaches they should use for their brick and mortar operations and e-commerce operations and whether to shutter or add stores.

For the sixth consecutive year, Dan Goodwill & Associates and the Business Information Group (publishers of Canadian Shipper and MotorTruck Fleet Executive) will be co-hosting a Surface Transportation Summit. The 2014 Summit, scheduled for October 15 at the Mississauga Convention Centre, will feature expanded networking opportunities and more educational tracks. The following are some of the highlights.

The event will be kicked off by Carlos Gomes, a Senior Economist with the Bank of Nova Scotia. Carlos along with a panel of shippers and carriers, will take a look ahead at where the Canadian Economy and the Canadian Freight Industry will be going in 2015. Joining Lou Smyrlis, Publisher and Editorial Director at the Business Information Group on a panel will be David Newman, Director, Equity Research Analyst with Cormak Securities, Patrick Cain, CEO at Cain Express and Mark Seymour, President of Kriska Holdings Ltd.

This will be followed by an Executive Leadership Perspectives panel. Paul Cooper, President of SLH Transport, Douglas Harrison, CEO of Versacold Logistics, Mathieu Faure, Marketing & Sales, Intermodal, CP Rail and Rob Penner, Executive Vice President and COO, Bison Transport, will share their thoughts on some of the major issues facing their sectors of the Transportation industry.

One of the hot topics at last year’s Summit was the need for more shipper-carrier collaboration. In fact, the primary advocate who spoke on this topic was Jacquie Meyers, President of Meyers Transportation Services. Jacquie will be back this year and will discuss this topic in a panel discussion with Gary Fast, Associate Vice president, Domestic Transportation Services at Canadian Tire and Elias Demangos, President & CEO, Fortigo Transportation Management Group.

The final track of the morning will focus on Same Day Delivery Service- Challenges and Opportunities. March Wulfraat, Founder and President of MWPVL International, one of the world’s foremost experts on Amazon’s fulfillment centres and same day delivery initiatives, will address what has become one of the hottest topics in the freight industry.

Thankfully, the first quarter of 2014 is behind us. The challenging winter across Canada and the northeastern USA and capacity shortages, brought on, in part by the weather, created a difficult environment for both carriers and shippers. Are we in the clear now? With the winter behind us and with the economy improving, can we expect freight supply and demand to come into balance? Here are some thoughts to ponder.

1. Climate Change will continue to produce Bad Weather

Because of its near-total dependence on petroleum fuels, the U.S. transportation sector is responsible for about a third of America’s climate-changing emissions. Globally, about 15 percent of manmade carbon dioxide comes from cars, trucks, airplanes, ships and other vehicles. A National Research Council report states that America’s transportation infrastructure is at risk due to the effects of global warming. Severe weather and rising water levels will impact roadways, railroads, and airports. Climate change will affect transportation primarily through increases in several types of weather and climate extremes. Climate warming over the next 50 to 100 years will be manifested by increases in very hot days and heat waves, increases in Arctic temperatures, rising sea levels coupled with storm surges and land subsidence, more frequent intense precipitation events, and increases in the intensity of strong hurricanes. The impacts will vary by mode of transportation and region of the country, but they will be widespread and costly in both human and economic terms and will require significant changes in the planning, design, construction, operation, and maintenance of transportation systems.

In other words, get used to it. The next winter may be worse than the last one.

2. Capacity Shortages May Increase and Get Worse

This is the fourth in a series of blogs on Technology in Transportation. The three previous articles appeared in 2013 (http://www.dantranscon.com/index.php/blog/entry/quotemytruckloadcom-and-freightopolis-enter-the-automated-freight-brokeragefreight-portal-space, http://www.dantranscon.com/index.php/blog/entry/innovation-and-technology-come-to-the-freight-brokerage-industry, http://www.dantranscon.com/index.php/blog/entry/freightsnap--an-exciting-new-visual-tool-to-verify-the-density-of-ltl-freight) and featured 5 interesting companies, FreightSnap, Freightopolis, QuoteMyTruckload, BuyTruckload and Post.Bid.Ship. In this piece, I will examine two other innovative freight transportation companies, Zipments (https://www.zipments.com/) and DashHaul (https://www.dashhaul.com/) that are using technology to transform their segments of the freight industry.

Walmart, Amazon, and Google, among others, are piloting same-day delivery projects in select locations around the country that have enough density and demand to drive the value proposition. However, obstacles persist, and success is contingent on critical mass. Expedited transportation is costly, and last-mile capacity is likely to become even more constrained as e-commerce grows. Moving small volumes over short distances at high speed is a significant challenge.

Zipments aggregates courier capacity—whether it's a truck, van, or bicycle messenger—in effect, creating capacity that didn't exist before, especially in urban areas. This New York City-based technology company has evolved into a “virtual freight broker for local and regional courier services”. The company serves four types of customers: retail, professional services, consumers, and restaurants. Many startups in the same-day delivery space are searching for capacity to provide consumers with the fastest delivery possible. That's not the case for Zipments that is focused on tapping into latent capacity. So whether it's auto part milk runs, florist delivery vans, or bicycle messengers, there's a huge nationwide fleet of available but untapped capacity. Zipments tries to work with fleet managers to help them better utilize their assets and serve other sectors.

The business is segmented both in terms of the markets it serves and the modes of transportation. Metro delivery is anything less than 10 miles, local deliveries extend out to 20 miles, suburban deliveries reach 30 to 50 miles and regional deliveries would represent going from New York City to Philadelphia or Montreal to Toronto. Zipments doesn’t do many regional deliveries yet, but as their network grows, they expect that segment to expand. There is capacity for regional deliveries; people are passing through these corridors every day.

The North American Free Trade Agreement (NAFTA) is celebrating its 20th anniversary in 2014. Since the enactment of NAFTA in 1994, trade between the United States, Canada and Mexico has increased almost 200 percent to an estimated $930 billion. The cross-border flow of goods between the U.S. and Canada has grown to $400 billion.

A new U.S. Transportation Department report shows three of the five surface transportation modes, truck, rail and pipeline, carried more U.S. trade with North American Free Trade Agreement partners Canada and Mexico by value in 2013 than compared to the year before. Most U.S.- Canada trade in 2013, 83.6%, was carried on the surface modes of truck, rail and pipeline. Trucks carried 54.4%, followed by rail at 16.7%, pipeline at 12.6%, vessel at 5.7% and air at 4.5%.

Michigan led all states in trade with Canada in 2013 with $74.6 billion. Of the top 10 states for U.S.-Canada trade in 2013, Washington had the highest percent change over 2012, a 6.4% increase. The top commodity category transported between the U.S. and Canada in 2013 was mineral fuels, valued at $134.1 billion, with $79.2 billion or 59.1% moved by pipelines. The next highest commodity category transported by a single mode in U.S.- Canada trade was vehicles and vehicle parts (other than railway vehicles and parts) with $66.1 billion in trade moved by trucks. Cross-border trade via truck and rail continues to show positive trade growth for Canada and the United States. The growth continues as freight transportation providers on both sides of the border strengthen their relationships with cross-border shippers.

Transforming words and good intentions into more concrete and long-term action, both the United States and Canada are promoting greater economic growth and jobs through a stronger, more visible commitment to regulatory cooperation. With greater opportunities for growth on the horizon, trucking companies on both sides of the border have bolstered their cross-border service offerings to accommodate trade. While Canada and the United States have been good friends for many years and have the longest unpatrolled border in the world, they are distinctly different countries. The two countries have different geographies, climates, cultures, currencies, populations, laws and transportation systems. A failure to understand the unique features of each country can lead to fines, service problems and unhappy customers.

As an example, Canadian e-Commerce is expected to grow at a double-digit pace over the next few years, and U.S. businesses are increasingly tapping in to that $32 billion annual market. But the not-so-good news is that businesses are bumping into unexpected challenges in transporting those goods from the U.S. to their Canadian consumers. A new research brief, “Canadian e-Commerce Presents New Opportunities for U.S. Businesses,” details those challenges, and also highlights ways in which U.S. businesses are overcoming those obstacles. The research brief details findings of a study conducted by Peerless Research Group in which supply chain managers were queried about issues with U.S./Canada e-Commerce shipping.

Freight rate increases are coming this year. The economy is on the upswing. Truck capacity is tightening as driver shortages, government regulations, cost overruns from a very challenging winter and carrier financial prudence all push freight rates in one direction - - - higher What can shippers do to mitigate the impact? A lot. Here is my list.

1. Capture your Freight Costs

Take a look at your freight costs and compare them to prior years. Look for opportunities to fix negative trends (e.g. lack of discipline in moving less than optimum size shipments, too much expedited or air freight etc.) that may have arisen.

2. Benchmark your Freight Costs

Obtain rate quotes from carriers that serve your traffic lanes. Compare their rates to yours. If your company ships high volumes, consider obtaining a benchmark freight rate service on at least your major lanes of traffic. The study will at least tell you if your company is paying market rates or higher and identify carriers that provide the same service at lower rates. There are also companies that provide an ongoing fee-based benchmarking service.

The term intermodal refers to moving a container or trailer by more than one mode of transportation—generally truck plus rail, ocean plus rail, ocean plus truck, or all three modes. Some recent freight industry trends—such as long-haul trucking capacity shortages, higher fuel costs, and a drive to reduce environmental impact—have sparked new interest in intermodal, especially pairing truck and rail as an alternative to over-the-road (OTR) trucking for domestic moves. For many years, shippers were reluctant to use Intermodal service. Memories of poor service, of containers or trailers stuck in a rail yard, coupled with the speed and flexibility of using over the road service on shorter distances, inhibited intermodal growth. That seems to be changing.

The American Association of Railroads is reporting record intermodal volumes in some months. Truck capacity and driver shortages, the investments made by the major railways on many key business corridors, the increasing use of Intermodal long haul service by truckers, along with improved technology are fueling a so-called “rail renaissance.” "Domestic intermodal is growing much faster than almost any other area of the U.S. economy or industry," says Scott Webb, senior vice president at NFI Intermodal, a carrier based in Cherry Hill, N.J.

What are some Best Practices that shippers and Logistics Service Providers can follow to take advantage of Intermodal service? Here are a few tips.

1. Educate yourself on how Intermodal service can benefit your company

Identify the railroads, drayage companies and IMCs (Intermodal Marketing Companies) that service your lanes of traffic. Learn about chassis, trailers and containers and the size and number of the containers (e.g. 20 foot, 40 foot and/or 53 foot) available in your area. Educate yourself on the head haul and back haul requirements of the intermodal providers serving your traffic corridors. Compare the transit times and costs against the over the road options across all lanes. Find out about their closest rail terminal and its hours of operation. Examine the length of haul on your major lanes and the hours of service it will take a driver to move your loads. Will an OTR driver hit the maximum hours of service in a day on some key corridors and then have to take a ”time out?” Would you be able to obtain essentially the same transit time by switching to intermodal service that can be competitive on lanes as short as 450 miles? If you are an import/export shipper, learn more about the locations of ports that serve your major locations. Meet with representatives of these companies, take some terminal tours and review your operational requirements with them. Find out what they can do for you.

Two developments over the past five years have reshaped the Canadian Freight Industry. The Great Recession in the late 2000s caused many Canadian trucking companies to shrink in size or leave the freight industry. During the past couple of years, there has been considerable consolidation in the small parcel, domestic LTL over the road and Intermodal segments of the Canadian freight industry. Shippers looking for a national courier or LTL carrier now see many familiar brands in the hands of a small group of companies.

Shippers worrying about whether there will full and fair competition in the Canadian freight industry in the years ahead can take solace from what is happening south of the border. Our American friends experienced the same economic downturn in 2007. Some experts believe that as much as fifteen percent of the freight capacity in the United States left the market during the Great Recession.

The good news is that as this capacity left the market, several emerging trends suggest that new strategies and business models are providing increased competition in the LTL sector.

Build a Carrier Partnership Network

Some significant carrier partnerships and alliances have been formed to provide more competition on the national and regional level. In an effort to compete with the national LTL players (e.g. YRCW, FedEx Freight, Old Dominion etc.), The Reliance Network was formed. It brings together:

At the January 21 Driving for Profit Seminar in Mississauga, Ontario, the number 61 was placed on the screen. Glenn Caldwell, Vice President of Sales for NAL Insurance, asked the audience if they knew the significance of this number for the trucking industry. As we learned, the number 61 represents the average lifespan of a professional truck driver in the United States, a number that is significantly below the national average for the rest of population (76 for an American male, 80 for a Canadian male).

One of the handouts at the Seminar was a 144 page report entitled Research on the Health and Wellness of Commercial Truck and Bus Drivers, Summary of an International Conference from the Transportation Research Board of the American Trucking Research Institute of the Federal Motor Carrier Safety Administration, published in 2012. The study focused on a range of issues and actions that can have an impact on the health and wellness of truck drivers.

Some Common Driver Health Risk Issues and Potential Actions

In last week’s blog I provided an overview of Omni-Channel Retailing, a very important transformational change that is taking place.  This change will have a profound effect on the retail and freight industries.  In this blog, I will outline some of the impacts that it likely to have on carriers and LSPs.

The catalyst for the changes to shipping processes and pricing has been Amazon Prime. Back in 2005, the online retailer announced free two-day shipping on qualified items. Designed to enhance loyalty and fuel top line sales growth, the Amazon Prime program has had a huge impact on Amazon’s success in recent years.

The impact has rippled through the retail and transportation industries. Brick-and-mortar retailers, in particular, have scrambled to devise strategies to counter free shipping.

In response, retailers are deploying a variety of solutions that leverage one of their best assets—their stores. This coupled with the growth of mobile commerce and social shopping, has seen the emergence of a new approach that represents a kind of boundary-less retail, where the silos between brick-and-mortar, catalog, and Internet retailers have disappeared—at least as far as the consumer is concerned. This is what many are calling omni-channel retailing.

The transportation and logistics companies that wish to be effective in the Omni-Channel arena must align their service portfolios and infrastructure to meet the needs of the retailers and consumers who will be increasingly operating in this environment.  To gain a better understanding of where omni-channel retailing is going, UPS commissioned a research study of 3000 consumers.  ComScore, a leading digital analytics firm, performed the study.  The result is the 2013 UPS Pulse of the Online Shopper: A Customer Experience Study.  Here is what they learned from a carrier perspective. 

Omni-Channel Retailing is a subject we are go to be hearing a lot about in the coming years. This is the first of two blogs on this topic.  In the first blog I will provide an oveview of what the term means and then outline the implications for shippers, retailers and consumers.  In the next blog I will outline the implications for freight transportation companies and logistics service providers.

It is helpful to define some terms to understand what is taking place.  The chart below and some of the content in this blog are taken from an article entitled Omni-Channel Supply Chains Designed for a Retail World without Boundaries by Randy Stang, Vice President of Customer Solutions for the Retail Industry team at UPS.  The chart captures the various retail models visually.

Over the past decade, retailers have been migrating from the basic Single Channel model of store to consumer retailing to the utilization of multiple modes (e.g. store and e commerce).  Multichannel retailing is the use of a variety of channels in a customer’s shopping experience.  Such channels include: retail stores, online stores, mobile stores, mobile app stores, telephone sales and any other method of transacting with a customer. Transacting includes browsing, buying, returning as well as pre and post-sale service.

As the name implies, Multichannel retailing involves serving customers through a discrete set of distribution options.   Pioneers of multichannel retailing include Macy's, Next PLC, John Lewis and Neiman Marcus. The pioneers of multichannel retail built their businesses from a customer centric perspective and served the customer via multiple channels before the term 'multichannel' was used.

One of the distinguishing features of 2013 was the number and range of crises that took place in many parts of the world.  We witnessed the terrible collapse of a building in India that was filled with garment workers, the typhoon in the Philippines, car bombings in the Middle East, the flood in Calgary, tornadoes in the United States and Mexico, the rail car disaster in Lac Megantic, Quebec and many others too numerous to mention.  Even here in Toronto we had a flood in July and the ice storm just before Christmas, both of which took direct aim at our home.

The two Toronto natural disasters provided me with ample opportunity to observe, first hand, the crisis management responses of some of Canada’s largest companies.  In fairness to these companies, there were hundreds of thousands of homes that were affected by these storms.  It takes time to restore essential services to that many homes and offices within a reasonable time frame.  Heat and power were restored within 3 days after the onset of the ice storm; telephone, cable TV and internet service took more than a week.

One of the most important elements of any company’s disaster recovery plan is the way it communicates with its customers.  While recorded announcements are helpful, it is important to be able to access a live person.  With one of our major service providers, this never happened.  Their phone rang but it was never answered.  When I passed one of their service personnel in the street, he supplied with a Twitter hashtag where I could keep abreast of developments.  My question to him was, what do you do when you have no electricity, no telephone service and no internet service? 

Another large provider did answer their phones but their people were trained to not provide direct answers.  They simply stated that they would be repairing our service the next day.  For three consecutive days they provided the same answer but did not follow through.  This was very annoying.  A third large supplier did answer their telephones and did come by at their designated time.  However their exterior technicians would not fix an internal problem and passed it off to an internal technician.  This resulted in an even longer delay.

When I think back to the ice storm in Montreal about a decade ago, I recall that our freight brokerage business was able to support our Montreal based clients by using our Toronto customer service department as a back-up.  In a crisis, whether natural or man-made, there are a range of problems that a freight company or shipper can face.  In addition to essential services, trucks and rail cars can be destroyed, cargo and buildings can be damaged and people can be injured or killed. 

In my previous blog, I tried to capture some of the Major Freight Transportation Stories of 2013 (http://www.dantranscon.com/index.php/blog/entry/the-top-freight-transportation-stories-of-2013).  In this blog I will look ahead to 2014 and beyond.  Here are some of the emerging trends that transportation professionals should monitor closely in the coming years.

1. The 10 Miles Per Gallon Truck

Heavy-duty trucks consume 1/5^th of the fuel consumed in the United States.  The world’s freight transportation requirements are expected to consume 70 percent more energy in 2040 than they did in 2010.  As demands for freight transportation rise in developing countries, this is also increasing the level of fuel consumption.

A recent HOS study suggests that the changes made in 2013 in the USA are having an impact on driver productivity.  New measures may further erode productivity.  An electronic on-board recorder (EOBR) mandate is also slated to be rolled out in the next year or two. It will likely eliminate log book falsification across the board and could easily clip another 2% to 5% of industry productivity. Mandatory speed limiters would be next and would eliminate some additional productivity.  New drug testing procedures are also being considered and would eliminate those drivers who are able to pass the current urine-based test despite habitual drug use. Taken together, this influx of regulations will reduce the number of drivers in the overall pool and will reduce the productivity of those remaining in the pool.

At a time when most truckers are striving to operate their fleets at 6 miles per gallon, talk of 10 MPG may seem like science fiction.  The good news is that fifteen industry manufacturers have joined together in the 21^st Century Truck Partnership.  Led by Daimler, Navistar and Peterbilt and a joint venture with Cummins and Peterbilt, they plan to have working prototypes within two years.  The four projects that fall within this initiative are experimenting with engines and heavy duty hybrids, vehicle power demands, idle reducing technology and new lightweight materials such as carbon fibre and high strength steel.  With driver recruitment being such a major challenge, improved vehicle productivity would be of major benefit to the trucking industry.

As the year 2013 winds down, it is time to reflect on the major transportation trends of the past year.  While I saw and read about a wide range of developments, these are the ones that resonated most with me.

1.Technology Comes to Freight Transportation

Last year I predicted that we would see a flurry of new technologies come to freight transportation.  They did and I wrote about some of these new companies on several occasions during the year.  Technology was successfully applied to the freight brokerage business, freight portals, LTL density calculations and to other segments of the industry.  Buytruckload.com, PostBidShip, Freightopolis, QuoteMyTruckload,  and Freightsnap were featured in various blogs during the year.  They are changing the way business is done in freight transportation.  Watch for more of these companies to surface in 2014.

2013 has been called the Year of the Network by numerous supply chain and transportation industry thought leaders.  Companies that built a successful supply chain trading partner network focused on three elements:

Connectivity— unite disparate systems and trading partners

If your trucking company hasn’t been purchased or doesn’t get purchased by TransForce, will it be in business in five years?  That is the question that came up in a recent discussion with a long time industry colleague.  The response I received was that he didn’t think his company would survive.  I was a bit surprised by the response and asked him for an explanation.  This led to an interesting discussion on what it is going to take to make it in the trucking industry in 2014 and beyond.

We both agreed that while the trucking industry has changed in some ways over the past decade (e.g. more use of technology, better cost controls after the Great Recession, LNG vehicles, greater use of 3PLs as customers), the industry is not that much different from ten years ago.  The slow economic turnaround since 2008 has created a challenging environment and there is little reason to expect a major improvement in the short term.  Rate increases are hard to come by, even with a tight driver situation.  Even more of a concern is the lack of innovation in the industry and the threat that such changes could wreak on so many complacent companies.

The warning signs are there.  As a Canadian, you don’t have to look much further than Nortel and Blackberry to see what can happen to industry leaders that were not able to keep up with changing consumer needs and quality competitors.  At the same time, one can observe what companies such as Amazon and Apple have been able to do to change the paradigm of some long established industries. 

Some of the large trucking industry players are making investments in technology and people.  They are integrating back offices and focusing on achieving economies of scale.  They are thoughtfully expanding their service portfolios and geographic footprints. 

Some of the small players are offering solutions that are very tailored to certain industry verticals and geographic areas.  Companies that are focused on same day delivery, refrigerated intermodal service, pooled LTL service, energy distribution and other emerging capabilities are creating a space for themselves in the industry.

The Intermodal Association of North America (IANA) reported an increase of 4.7 percent in total intermodal traffic in the third quarter of 2013 compared to the same time period in 2012. Continuing to lead intermodal growth, domestic container volume increased for the 2013 third quarter by 9.4 percent when compared to third quarter 2012 volume. All domestic equipment experienced a 7.6-percent gain in the 2013 third quarter, including a 1.2-percent boost in intermodal trailer volume for the same period.

The increase in total intermodal traffic for the 2013 third quarter was also caused by a slight rise in international volume by 2 percent over 2012 third quarter volume. A slow but steady growth trend may be expected for the international market if jobs, consumer spending and/or the broader economy accelerate, according to IANA.

The third quarter of 2013 marked the first time that international shipments were outpaced by seasonally adjusted domestic shipments. Joni Casey, president and CEO of IANA, said, “For the tenth quarter in a row, domestic container volume flexed its muscles and has outpaced international shipments driving the gains in total intermodal traffic. It is also worth noting that the trailer segment grew in all three months of the third quarter, reversing three years of decline and contributed to domestic growth.” 

What are the factors contributing to the sustained growth in intermodal business?

The U.S. is still a major manufacturing centre

At the end of each year, I like to take stock of the major freight transportation stories of the past twelve months and look ahead to the trends that will drive the industry in the coming year.  The two blogs that I write are prepared from my perspective as a consultant to shippers and carriers.

This year I would like to hear from you.  Those of you who follow this blog observe trends in your segment of the industry.  Please take a minute to share them with me.  Please post them on this blog or send a private e mail to dan@dantranscon.com. 

Please feel free to select any major trend or trends that are having or will have a major impact on our industry, whether regulatory, economic, technological, demographic, consumer behavior, environmental, modal shifts or business strategy.

To broaden the range of inputs and perspectives, I will also post this request on Facebook, LinkedIn and Twitter.  In the coming weeks I will be preparing my two lists.  The lists will include a blend of my observations and yours.  Look for these two blogs in mid-December.  Thank you to those of you who take the time to share your observations with me.

One of the highlights of this year’s Surface Transportation Summit was the impassioned plea from Jacquie Meyers, President of Meyers Transportation Services, for shippers and carriers to collaborate.  This is not a new message.  In fact, it is a message I have heard many times over the past ten years.  The difference was the sincerity with which Jacquie communicated her message, the rationale for the message, the unique issues the transportation industry faces as we enter 2014 and the way her message resonated with the audience.  I have had the opportunity to read all of the completed post-Summit surveys that we received this year.  Jacquie was repeatedly singled out as one of the most important voices at the event. 

Trucking companies are not commodities

As we know, the pendulum swings back and forth over time between shippers and carriers.  When the economy is weak, shippers can play one carrier off against another as leverage to reduce rates.  When the economy is strong and capacity is tight, carriers hold the upper hand and can push through rate increases. 

One of the key messages that Jacquie made is that in recent years, shippers have tended to commoditize carriers.  The many shippers that have flooded the market with RFPs have tended to focus on price.  As several Summit speakers pointed out, some shippers send their RFPs to forty or fifty or more carriers.  Jacquie and others expressed the view that shippers often don’t take into consideration the range in quality from one carrier to another.  Quality is reflected in superior on-time service performance, superior customer service, late model equipment, strong safety records, excellent shipment tracking tools and low damage claims. 

This is a critical issue that seems to be ignored by some shippers.  Since a supply chain is only as strong as its weakest link, the use of low priced carriers can result in customer dissatisfaction and lost sales. 

For the past several years, American Shipper, in partnership with the Council of Supply Chain Manage­ment Professionals (CSCMP) and Retail Industry Leaders Association (RILA), has successfully benchmarked more than 250 payers (shippers and 3PLs) on their transportation invoice processing and payment practices and systems. Participants completed a 28-question survey covering all modes of international and domestic freight transportation.  The report focused on transportation spend in three segments—procurement, execution and settlement.  Here are some of the major findings and recommendations.

The 6 Key Invoice Processing Functions

The report looked at the six key functions of invoice processing.  They include Invoice Receipt, Validation, Dispute Resolution, Approval, Payment and Audit.  The study found that about a quarter of the respondents outsourced the receipt and validation functions while over 40 percent use automated tools; the remaining 30 percent of the respondents process their invoices manually.

Two thirds of respondents use manual processes to resolve billing disputes.  Forty-five percent of respondents approve invoices manually while 42 percent approve them electronically.  The remainder are approved through a third party.  In fifty-three percent of the cases, the invoices are paid electronically while about a quarter are paid manually and another quarter are paid through an outsourced provider. 

Forty-five percent of the invoices are audited manually while 29 percent are done electronically and 26 percent are audited through a third party. The majority of shippers automate, or outsource the receipt and validation of invoices while dispute resolution remains highly manual.

Canada is going through some dramatic evolutions and revolutions in the world of retailing and in retail distribution.  The changes are very evident every time I visit or drive by my local shopping mall, the Yorkdale Shopping Centre in Toronto.

The mall has gone through another major expansion.  Microsoft and Apple have stores a few feet apart.  The number of American chains (e.g. Victoria’s Secret, William Sonoma) continues to expand.  Some high end chains (e.g. Holt Renfrew, Harry Rosen), that have been in the mall for decades, are in the process of major expansions.  The upstairs food court has been totally transformed and upgraded.  In addition to the old standbys, (e.g. Chinese, Thai, Greek food), one can now buy lobster grilled cheese sandwiches, high quality Indian food and a host of new treats at the mall. 

So what is going on out there?  There are a number of discernible trends taking place that will have a direct impact on freight transportation in Canada. 

Mergers and Acquisitions

Loblaw’s is in the process of buying Shopper’s Drug Mart, Sobey’s has bought Canada Safeway and Hudson’s Bay Company is buying Saks Fifth Avenue.  This will certainly lead to warehouse rationalization, the cross-selling of specific items (e.g. President’s Choice Products) in Shopper’s Drug Mart stores, carrier consolidation and a host of other transportation related changes.