A couple of weeks ago I had the privilege of listening to Max Long, President of Microsoft Canada as he addressed a group of MBA students and business executives at the University of Toronto’s Rotman School of business.  He offered some very valuable advice that I would like to share with the readers of this blog.  With so many young people struggling to find work, or at least find work that is aligned with their career aspirations, Mr. Long shared some insights that resonated strongly with me.

Don’t Pay Attention to the Limitations that other people place on your Career Aspirations

Mr. Long’s first message was to not let other people define you and your career.  If you believe that you have the skills and desire to achieve success in a particular area of interest, go for it.  If you believe this is your true calling, don’t be deterred by the feedback of other people who might tell you that you will never be successful in sales or operations or law or wherever you seek to go in life.

Don’t work for a company that you are not passionate about

Mr. Long provided several good insights on this topic.  One of his key points is that there is a need to differentiate between the boss and the company.  If a person has a passion for the company but does not like the boss, stick it out.  Bosses come and go.  In mid to large-size companies, bosses get transferred and promoted. 

At the time of this writing, there is less than a week until the new US federal $75,000 financial security requirement for freight brokers and forwarders goes into effect.  By now, most everyone has the deadline of October 1^st committed to memory, but many still do not understand the options available to meet the FMCSA requirement.

October 1^st Deadline Stands

According to the FMCSA (Federal Motor Safety Administration), all brokers and forwarders must file new BMC-84 and BMC-85 forms confirming $75,000 financial security as of October 1, 2013.  Although the FMCSA has allowed for a “phase-in” period which has created confusion, the agency’s guidance released September 5^th indicated the extension was provided solely to allow the industry to complete all necessary filings.

If proof of the $75,000 bond or trust is not filed on time, freight brokers and forwarders will receive notification from the FMCSA giving 30 days to get the bond or trust in place before revoking the broker or forwarder authority.  The fact remains that brokers and forwarders must have the $75,000 financial security in place in order to operate legally.  Even though a broker may not be penalized by the FMCSA until December 1st, their clients will not be guaranteed payment until the $75,000 financial security is in place, likely affecting their ability to continue operations.

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If you haven’t been watching, you may be missing one of the most interesting and important battles in retailing and freight transportation - - - the clash to deliver shipments to consumers on the day they are ordered.  Here is how the battle is shaping up. 

At this point, the names of some of the key players are pretty familiar to most residents of North America.  Amazon, Wal-Mart, Google, Target, FedEx, Walgreen, eBay and Best Buy are moving forward with same-day delivery services in the United States.  In Canada, four major retail brands and Canada Post are launching a same-day delivery service for online orders in the Toronto area.  The Delivered Tonight e-commerce service is a pilot project with Best Buy, Future Shop, Indigo and Wal-Mart. 

For now, the strategy seems to be more about creating a customer expectation of same-day service than answering consumer demand. As Amazon has done before, it is working to create that demand with same-day shipping in 10 cities, while it also builds warehouses near major metro areas, paving the way for same-day delivery service on a much broader scale.  Currently, Amazon is able to reach 15% of the market in America’s top 20 metropolitan areas.  It is making a major to push to add warehouses close to these markets that would allow it to reach 50 percent of Americans.

Another feature of same-day delivery is convenience. The major retailers are testing various same-day delivery models.  Wal-Mart is offering in-store, same-day pickup for online orders.  Amazon is exploring the “pick-up” model as well with its new Amazon Lockers in convenience stores, grocery stores and drug stores in selected cities.  eBay is testing an “eBay now” mobile app, available in San Francisco and New York City, that relies on couriers for same-day delivery of products ordered online from existing partner stores.

A picture is worth a thousand words.  This certainly applies to LTL freight.  Shippers can be penalized financially if their LTL freight is priced incorrectly using the wrong class or density.  LTL carrier margins suffer when their trailers contain freight that has been priced incorrectly due to inaccurate dimensions and weight.  A new start-up venture has entered the LTL space to address this specific issue.

FreightSnap (www.freightsnap.com) launched its business in January of 2013.  This technology-based business uses digital images to capture cubic dimensions, cubic pounds per foot, the anticipated freight class and the bumping weight.  These images are stored in a cloud database for easy access and enterprise reporting. The user can take either one or two digital images of the same piece of freight.  The key is to make sure to have something in the image to scale to ensure the readings are accurate.

The user inputs the weight of the shipment and then uses the screen controls to indicate the end points of the freight.

Companies typically call us in when they are having a problem and they are not able to solve it themselves.  For shippers, the problem is usually that they are spending too much money on freight and are seeking solutions to bring these costs under control.  For carriers, the problem is that they are not achieving a satisfactory profit.

In our work we have observed a number of variables that play a key role in determining whether the problem or problems get solved or not.  Here is what we have learned.

It takes a multi-disciplinary effort to solve these problems

While one might think that freight transportation is a small element of a company’s operation (and often less that 5% of its costs), it tends to intersect with Sales, Production, Customer Service, Finance and other business functions.  The same can be said for improving the profitability of a trucking company.  Profit improvement comes from a team approach to solving the problem.  Improving one area of the company while leaving the others untouched will usually have a minimal impact on a company’s bottom line.

It starts at the top

On Sunday morning, I had the pleasure of listening to a great interview conducted by Fareed Zakaria, the host of GPS (Global Public Square) on CNN.  Mr. Zakaria interviewed Sara Blakely, the youngest self-made female billionaire in the United States.  Her story is one of personal achievement and success but it is rooted in dealing with failure.

As Sara explained during her interview with Mr. Zakaria, her father would ask her a question each night at the dinner table that you don’t often hear in too many homes.  The question was “What did you fail at today?”  When asked about the biggest influence on her life, Sara mentioned her father and the power of this question.

It is important to understand that Sara started her career working at Disney World and then sold fax machines for Danka for seven years.  She tried to get into law school but she could not pass her LSAT entrance exams.

At age 27, she moved to Atlanta, and while still working at Danka, spent the next two years and her entire $5,000 in savings researching hosiery patents and visiting craft stores to find the right material for her product. Eventually coming upon a solution, she wrote her own patent from a Barnes & Noble textbook and incorporated her company under the name Spanx. Turned away by numerous mills who did not see the value of her idea, she eventually found a hosiery factory in Asheboro, North Carolina, that was willing to make her product.  She successfully pitched her idea to Neiman-Marcus by personally taking the buyer to the ladies restroom to show her the benefits of Spanx in person.  Bloomingdales, Saks, and Bergdorf Goodman soon followed.  

Spanx helps women draw the line on pantylines. The company, which also caters to men, makes footless and footed hosiery, tights, and body shapers to give wearers a slim and smooth look. Spanx now has annual sales in excess of $500 million and Sara Blakely is the sole owner.

Last week the Stifel Transportation & Logistics Research Group hosted a webinar event that featured two speakers from the Transportation Intermediaries Association, Mark Christos, TIA Board Member, Chair - 3PL Market Report and Robert Voltmann, President and CEO.  The two gentlemen presented some of the findings from their latest benchmarking report.  This data, supplied by a sample of TIA members, provides one indicator of how the transportation industry is performing.

The report looks at trends in truckload, intermodal and LTL shipping.  It also captures information on fuel related costs.  The current (first quarter 2013) report contained some interesting findings.

The percentage of transportation intermediaries offering LTL services has now increased to over 60 percent.  While LTL shipments represented 6 percent of TIA member revenues in 2010, this has gone up to 8 percent in 2012.  First quarter LTL revenues, among the TIA members reporting results, were up 6.5% year/year and compared to 4 percent increase for intermodal and 2.4 percent for truckload.  LTL profit margins were up 140 basis points year/year (1.4%) as compared to a 90 basis points drop for intermodal and a 70 basis points decline for over the road truckload.

LTL profit margins increased to 18.6 percent as compared to 10.0 percent for intermodal and 13.8 percent for truckload.  It was also interesting to note that small LTL players (e.g. less than $16 million in annual sales) experienced a 240 basis points increase in year/year profits while the very large LTL carriers (e.g. over $100 million in annual revenue) experienced a 200 basis points improvement.  The mid-size LTL carriers (e.g. $16 million to $100 million) suffered a 110 basis points decline in profit margins.  In one of their charts, one could see that the upward trend on LTL profit margins has been maintained since the fourth quarter of 2011. 

One of the TIA representatives noted that there are two developments that are creating a bit of an industry shakeout.  The new requirement for a freight broker to post a $75,000 surety bond is posing a challenge for some of the smaller players.  Anecdotal evidence seems to indicate that brokers moving less than 5 loads a day are finding the new environment most difficult to manage. 

The 2013 Surface Transportation Summit is scheduled for October 16 at the Mississauga Convention Centre.  This year’s event, co-hosted by Dan Goodwill & Associates and the Business Information Group, will focus on a range of topics of interest to Shippers and Carriers.

The first track will explore the economic outlook for 2014.   The Summit will be utilizing a new format this year.  The three speakers, a leading Canadian economist (Carlos Gomes, Scotia Capitol), a trucking company President (Doug Munro, Maritime-Ontario) and an industry consultant (Charles Clowdis, Global Insight) will share their knowledge and insights in a dialogue about the key factors that will drive the economy next year. 

This session will be followed by a CEO panel.  Each panelist will provide their perspective on where the transportation industry, or their segment of the industry, is heading.  The panel will consist of Wes Armour, President & CEO, Armour Transportation Systems, Jacquie Meyers, President, Meyers Transportation Services, Fabi Richenberger, President, Northbridge Insurance and Peter Harrison, AVP, CPCS.  This promises to be a thought-provoking session.

Following a short networking break, the next track will look at outsourcing fleet management to a third party.  The panel will consist of two individuals.  Angelo Sarracini, President of Bailey Metals, a large shipper, will talk about the process of evaluating the option of transferring the freight transportation work from an internal fleet to a dedicated fleet specialist.  Jeff Lindsey, the President and CEO of Canada Cartage, will outline the conversion process and highlight some of the Best Practices in Dedicated Fleet Management.

Intermodal transportation has long been a key component of long haul transportation, both domestic and cross-border.  Many shippers still don’t have a full understanding of how and when to use intermodal service in their supply chain strategy.  This track will feature a panel discussion among the executives of four companies that are all heavily engaged in this sector.  Keith Reardon, VP of Intermodal Services at CN Rail, Ron Tepper, Executive Chairman & CEO of Consolidated Fastfrate, Neil McKenna, Vice President of Intermodal Transportation, Canadian Tire and Barry O’Neil, Executive Vice President, Hub Group Canada, all experts in the field of intermodal transportation, will share their thoughts on the role and value of this service.

The major business news story in Canada this past week was the planned acquisition of Shoppers Drug Mart by Loblaw Companies Limited for $12.4 billion.  Loblaw Companies Limited, a subsidiary of George Weston Limited, is Canada's largest food retailer and a leading provider of drugstore, general merchandise and financial products and services. Loblaw is one of the largest private sector employers in Canada with more than 1,000 corporate and franchised stores from coast to coast.

It supplies more than 5,000 private label products that provide customers with healthy, organic, environmentally friendly and high-value alternatives. Introduced in 2006, its Joe Fresh brand is now available in more than 300 Loblaw banner stores across the country. This line includes the Joe Fresh collection (apparel and accessories), Joe Fresh beauty products (cosmetics) and Joe Fresh bath products (a range of bath and body products). 

Shoppers Drug Mart Corporation is the licensor of full-service retail drug stores operating under the name Shoppers Drug Mart (Pharmaprix in Québec).  With 1,242 Shoppers Drug Mart and Pharmaprix stores operating in prime locations in each province and two territories, the Company is one of the most prominent retailers in Canada.  The Company also licenses or owns 57 medical clinic pharmacies operating under the name Shoppers Simply Pharmacy (Pharmaprix Simplement Santé in Québec) and six luxury beauty destinations operating as Murale.  As well, the Company owns and operates 62 Shoppers Home Health Care stores, making it the largest Canadian retailer of home health care products and services.  In addition to its retail store network, the Company owns Shoppers Drug Mart Specialty Health Network Inc., a provider of specialty drug distribution, pharmacy and comprehensive patient support services; and MediSystem Technologies Inc., a provider of pharmaceutical products and services to long-term care facilities.

The tragic accident in the Quebec town of Lac-Mégantic was the major transportation story of the past week.  As of tonight, the death count is at 33 but it will likely reach 50 people when all the bodies are found.  In addition, much of the downtown of that town area was destroyed as 72 tanker cars of the Montreal, Maine and Atlantic Railway Ltd., carrying crude oil, caught fire as they came off the tracks.

Rail transportation in Quebec, Canada dates back over a century.  The rails have been a key element in the history of commerce in this Canadian province.  The railway has been hauling iron ore, pulp and paper and other commodities for many years.   But the sharp decline in the United States housing market, as a result of the Great Recession, reduced the demand for Quebec’s lumber.  This motivated the MM&A Railroad and others to shift their focus to the movement of crude oil via rail.

The transportation of crude oil via tanker car goes back to the days of John D. Rockefeller.  The rail industry is now hauling more crude oil than it did in those days.  Trains transported a record 97,135 carloads of crude in the first quarter of 2013.  That’s 166 percent more than during the first quarter of 2012 and 922 percent more than the rails handled during all of 2008.

Union Pacific, the largest US railroad, tripled the amount of crude it moved the previous year.  BNSF, America’s second largest railroad, is now transporting 650,000 barrels a day versus almost none five years ago.  Canadian Pacific Railway expects to haul 70,000 carloads of crude in 2013, up from 500 in 2009.

While moving crude oil by pipeline still costs about half to one-third of what it costs to move it by rail, trains don’t require long term contracts or need to wait for pipelines to be built.  While pipes stretch only from point A to point B, refiners can access nearly any market in the United States or Canada by rail.  Flexibility and the ability to easily shift delivery markets to maximize revenue, has been encouraging oil companies to increase the leasing of rail cars.

One of the most enjoyable aspects of our work as consultants is that my colleagues and I have an opportunity to visit companies in a variety of industries.  We typically are engaged to help businesses that have issues with freight management.  While some of our clients may be Best-in-Class when it comes to manufacturing or retail, they are often not as skilled in managing freight transportation. 

We often notice that their freight strategies are not aligned with their business strategies.  In fact, they often inhibit these companies from achieving the bottom line results that they are so desperately seeking.  Here are some of the things that we commonly observe.

Many companies focus on the outbound movement of their freight to their DCs, retail stores or customers.  They let their vendors control all or some of the deliveries of raw materials or finished products to their main manufacturing or distribution facility.  This can produce several negative financial impacts. 

For many vendors, freight is a profit centre.  They mark up their freight costs and include the inflated cost in the landed cost.  By not having control of inbound freight movements, this restricts the leverage a company can have with its carriers when it comes time to negotiate freight rates.  It also limits the opportunity to perform consolidations to further reduce freight costs.

We also observe that a number of companies are not providing their clients with the level of service they require.  This can occur for several reasons.  The carrier may be picking up or delivering the shipper’s products at the wrong time.  Their transportation network is not aligned to the needs of some of its customers.  A late pickup or delivery, on a consistent basis, can mean the loss of customers.  It may result in wasted warehouse or store expense as the crews stand around waiting for the freight to arrive.  In addition, carriers may be holding freight on their docks to build better loads to certain destinations.   They do this in the hope that shippers that do not carefully track the on-time service performance will not notice these late deliveries.

Dr. Richard Mikes, Managing Partner of Transport Capital Partners (TCP) recently spoke on the subject of the Truckload Market on a conference call hosted by Stifel Nicolaus & Company.  Here are some excerpts from the survey results presented by Mr. Mikes. 

“The freight rate market as a whole started switching directions about a year ago. In other words, the share of the carriers reporting that their freight rates are increasing has just dropped from a high of about 80% to a low of about 10% this past month. Accordingly, we would classify rates as being stuck in neutral. Three quarters of the firms are now reporting that rates have remained the same, certainly a massive change from a year ago.”

The survey segmented carriers into two groups, those under $25 million and those over $25 million in revenue.  “Interestingly, the … (data) . . .  presents “a real divergence in rate changes. Though both large and small carriers are largely keeping rates the same, there is a spattering of smaller carriers reporting rate decreases of 5%, 10%, or even 15%. Those numbers total only 18%, but they still tell the story. The pressure is on the smaller carriers.”

The FTR survey asked carriers to indicate their expectations with respect to volume.  “After a nice bounce this quarter, about 52% of carriers expect volumes to increase over the next 12 months and a similar number expect them to remain the same. Very few say volumes will actually decrease.

The survey then looked at what carriers plan to do with respect to adding capacity in this predicted environment. “The number of carriers saying they will not add capacity remained largely constant with a temporary spike around the . . . (U.S.) . . . election. It jumped up to almost 50% around election time. Those were the feelings in the moment.

Last week the Council of Supply Chain Management Professionals released its 24th annual State of Logistics Report. Last year, business logistics costs were once again 8.5 percent of U.S. Gross Domestic Product (GDP), the same level they hit in 2011, the new report says. That means freight logistics was growing at about the same rate as the GDP. Inventory carrying costs and transportation costs rose "quite modestly" in 2012, said the report's author Rosalyn Wilson. Year-over-year, inventory carrying costs (interest, taxes/obsolescence/depreciation/insurance, and warehousing) increased 4% y/y as inventory levels climbed to a new peak. Meanwhile, transportation costs were up 3% y/y predominantly from an increase of 2.9% in overall truck transportation costs.

This "new normal" is characterized by slow growth (GDP growth of 2.5% to 4.0%), higher unemployment, slower job creation (which will primarily be filled by part-time workers due to higher healthcare costs), increased productivity of the current workforce from investment in machinery/technology (and not human capital), and a less reliable or predictable freight service (as volumes rise but capacity does not increase fast enough to meet demand). Wilson noted that slow growth and lackluster job creation has caused the global economy to wallow in mixed levels of recovery. "This month will mark the fourth year of recovery after the Great Recession, and you're probably thinking that here has not been much to celebrate," said Wilson. "Is it time to ask, 'Is this the new normal?'"

For logisticians, the "new normal" means less predictable and less reliable freight services as volumes rise but capacity does not. In areas such as ocean transport, Wilson said, this can mean slower transit times. "I do believe the economy and logistics sector will slowly regain sustainable momentum, but that we'll still experience unevenness in growth rates," Wilson predicted.

For cutting-edge logistics managers, however, the current environment also means great opportunities to secure increasingly tight capacity in an era of shrewd rate bargaining. This is partly because the trucking industry, in particular, is facing a lid on capacity because of higher qualifications for drivers while top carriers are becoming increasingly selective in their choice of customers and in the allocation of their assets.

"Truck capacity is still walking a fine line—few shortages, but industry-high utilization rates," Wilson explained. Truckload capacity continues to remain stagnant (with the majority of new equipment orders for replacement or dedicated fleets and the copious amount of truckload capacity sapping regulations coming down the pipeline) and the assumption that freight demand will continue to modestly increase (as the economy continues to muddle along at low single digit GDP growth in combination with population growth), a less predictable and less reliable freight market is developing (as described in the "new normal").

Every year at this time, RBC Dominion Securities Inc. assembles a group of investors and invites Jim Allworth, Co-Chair and Portfolio Strategist to address the group.  This year’s session was particularly noteworthy in that Mr. Allworth painted a rather optimistic picture of the medium term prospects for the US and Canadian economies. The Saturday Globe & Mail newspaper also carried a feature article with the headline “A Recovery in Red” as did an April Time magazine feature (How ‘Made in the USA’ is Making a Comeback).  These forecasts have significant implications for freight volumes during this three year period.  Here is some of what they had to say.

The Great Recession has produced four years of below normal economic growth.  The United States, the world’s largest importer and largest economy has been growing at 2 percent per annum as compared to its normal 4 percent.  This has pulled everybody down.

Mr. Allworth cited a recent economic report of the US Congressional Office, a non-partisan group of economists, with a reliable track record, that is now predicting economic growth of 3 – 4 percent during the period 2014 to 2016.  This growth is being driven by several factors. 

The countries with low wage levels (e.g. China) boosted wages last year.  This is making the US more attractive from a cost perspective and shifting some manufacturing back to the United States. 

The process of extracting shale oil and gas through fracking is having a very positive impact on the supply of energy in the United States.  As a result of technological improvements, the US is using 2 million less barrels per day than it did a few years ago.  Through fracking, the country is producing 2.5 million barrels per day of new energy.  In total, this is a swing of 4.5 million barrels per day.  The US is expected to be energy independent within 6 to 10 years.

As we approach the mid-point of 2013, here is a peek at some of the major trends that are having an impact on freight transportation.

Economic Growth to remain Modest and Uneven

The economy continues to deliver mixed signals. In the past week, the US and Canada reported strong growth in employment. In fact, the 95,000 growth in jobs in May of 2013 is the best monthly number in Canada in decades. The question is whether this was a one month aberration or an indicator of better days ahead? A look past the job numbers tells a different story. Only a few hot spots (such as the shales) are displaying significant growth. Housing and automotive are strong sectors. Additionally, NAFTA-related trans-border activity has presented opportunities for carriers.

At this point, it is hard to build a case that the 2H13 would be much better, especially in light of the mediocre Spring in so much of North America. However, strong automotive production (some plant shutdowns have been eliminated or cut short), the release of pent-up consumer demand accumulated during this year's elongated winter, continued recovery in housing markets, and hurricane/tornado repair/reconstruction efforts on the US could make the 2H13 stronger than some anticipate. But The Institute of Supply Management's monthly index or "PMI™ registered 49 percent in May, a decrease of 1.7 percentage points from April's reading of 50.7 percent, indicating contraction in manufacturing for the first time since November 2012 and only the second time since July 2009. This index will need to be closely watched in the months ahead to see if there will be a sustained improvement in economic activity.

Supply Chain Optimization is Lowering Freight Costs

Social media has become one of the hottest marketing tools over the past five years. LinkedIn, Facebook, Twitter and a host of new sites are now a major part of our daily lives. Since I began blogging in 2005, I have become an active participant in this new world. I have learned a great deal and continue to learn every day. Here are a few observations from my travels down the social media trail.

The first thing I learned is that you need to be very focused on what you are seeking to achieve from using social media, particularly from a business perspective. On Twitter you can follow virtually every path of interest, whether it is music, tennis, sailing, cooking or politics. There are thousands of people who share your interests on just about any topic. The question is how will you and your business prosper by participating in one or more social media or discussion groups? The first step on the journey is to set some clear goals, whether it is finding new prospects, recruiting new talent or demonstrating expertise.

Second, don't overlook the obvious. A good website is one of the best instruments for telling your story. However for a website to be truly effective, it has to be optimized. Search engine optimization is the process of identifying the key words about you and your company. If you develop a good website but don't perform SEO, it will likely be ineffective.

A third lesson is the value of consistent communication. In our case, I write a weekly blog that deals with topics of interest to our customers. It takes time, some writing skills, knowledge and persistence to prepare an interesting blog every week. My blog appears in several locations on the internet and is now read by thousands of people a week. After writing hundreds of blogs, they provide another source of traffic as individuals perform searches over time. Both the new and old blogs produce a steady flow of activity.

Fourth, select the social media sites and groups that are most relevant to what you do. Since my company offers freight transportation consulting services, we try to participate in those sites (e.g. LinkedIn transportation groups) where we will likely interact with prospective clients and vendors in our target industries. To raise our profile, we created a LinkedIn group (Freight Transportation Best Practices) and a daily newspaper (e.g. Dan's Transportation Newspaper) that most closely align with the mission of our company.

In last week’s blog, I shared some ideas from the recent SCL – CITA annual conference on how to improve shipper- carrier collaboration.  Various suggestions were proposed by a panel consisting of two leading shippers and two major Canadian carriers.  Some other thoughts were expressed during other tracks that day.

The panelists presented some suggestions that came out of a joint meeting between the Ontario Trucking Association and the Canadian Industrial Transportation Association.  Here is more of what they had to say.

Removing Waste from the Shipper and Carrier’s Operation

During the panel discussion it was suggested that it is through trust, communication and dialogue, rather than through an RFP, that opportunities to remove waste from a shipper’s operation can be identified, discussed and solved.  The RFP process is typically too rigid to allow for a meaningful exchange of ideas and for the development of action plans. 

Since the focus in an RFP is typically on rates and service, it doesn’t create a forum for dedicated problem resolution.  Moreover, by not creating project teams, action plans and time lines to remove waste, the inefficiencies typically doesn’t get extracted.  The shipper continues to perform the same functions, in the same way, with its existing and/or new carriers.  Drivers continue to be pick up half full loads since opportunities to consolidate freight or change pick-up dates are missed. As one trucking executive mentioned, the savings generated from these types of initiatives can be much larger than the two percent saved as a result of the freight bid.

The subject of Shipper-Carrier Collaboration and Freight Bids came up in at least three tracks at this week’s Supply Chain Canada Annual Conference, presented by SCL and Canadian Industrial Transportation Association.  The subject was discussed at length during a panel discussion entitled, “Shipper-Trucker Relations” led by Lou Smyrlis, Editorial Director, Transportation Media, Business Information Group.  To address the sad state of relations, the panelists highlighted some of the issues raised at a recent meeting held between representatives of the Ontario Trucking Association and the CITA, one of Canada’s leading shipper advocacy groups. 

This discussion was of great interest to me and my company since we have been involved with freight RFPs (Request for Proposals) for over nine years, helping shippers design and execute their bids and helping carriers respond to some of the more complex RFPs.  Here is some of what I heard this week and a few ideas on how to fix several of the problems.  First here is a bit of background.

The Great Recession – the Trigger for the Freight Bid Mania

Prior to forming my consulting practice in 2004, I worked for carriers in the freight industry for many years.  Freight bids have been around for at least twenty years.  Before entering the consulting arena, I had seen and responded to my fair share of RFPs.  Freight bids became very prevalent during the Great Recession in the late 2000s.  As business volumes and revenues shrank, many shippers employed this tool to drive down their freight rates. 

One of the panelists on the Shipper-Carrier Relations track spoke about how overused and abused the tool became.  He highlighted the fact that some shippers conducted as many as three bids on the same freight in the same year to drive down rates.  Freight bids have now become an overworked and often times poorly used instrument to source modes and carriers.  One trucking company executive on the panel was very blunt in his views on freight bids.  He stated simply, “I hate them.”

Two weeks ago I wrote about two exciting young companies (PostBidShip and Buytruckload.com) that are applying Innovation and Technology to the automated freight brokerage/freight portal space (http://www.dantranscon.com/index.php/blog/entry/innovation-and-technology-come-to-the-freight-brokerage-industry).  Subsequent to that blog, I was made aware of two more interesting companies that have entered this space, QuoteMyTruckload.com and Freightopolis.  I contacted each of these companies to learn more about their operations. 

QuoteMyTruckload.com

QuoteMyTruckload.com (www.QuoteMyTruckload.com) is one of the portfolio of services offered by InMotion Global Inc., an Interstate Logistics Group Company based in Saint Petersburg, Florida.  The company began as freight broker.  QuoteMyTruckload.com is the truckload quoting and rating module available through their InMotion Global TMS® (www.TheFreeTMS.com) transportation management software solution that is targeted at large shippers moving heavy volumes of freight.  It utilizes the same patented truckload quoting technology.

Trucking is a $37-billion industry in Canada. The U.S. trucking industry is about ten times the size of Canada’s trucking industry.  In 1998, almost half of the industry's registered trucks in Canada were heavy-duty vehicles weighing more than 15 000 kg (33 000 lbs.) in gross vehicle weight (GVW). They were used primarily to transport freight between urban centres across Canada and to transport goods between Canada and the U.S. and Mexico.

The same study showed that forty-one percent of the energy consumed to transport freight in Canada was used by heavy-duty trucks, and the commercial road transportation sector produces 19 percent of the total emissions in Canada. Carbon dioxide (CO₂) is the principal greenhouse gas (GHG) that contributes to the global problem of climate change. A fuel-efficient truck fleet lessens negative impacts on the environment, improves a company’s image and, most importantly, boosts a its bottom line. A November 2012 Carbon War Room report found that purchasing new or retrofitting existing trucks with fuel-saving technologies can cut fuel costs by 30 percent and result in savings of up to $167,000 per vehicle over 10 years.  The long-term cost benefits of adopting fuel-efficient fleets are clear. But adding up the cost of a new tractor-trailer, top-of-the-line battery, aerodynamic fairings, advanced cruise control and a fuel-efficient transmission brings the price tag to nearly $130,000 per truck — a hefty upfront cost and a tough sell for buyers.

This report also found that employing a full suite of fuel-saving technologies generates annual fuel savings of $26,400 per tractor-trailer. When you consider that the upgrades pay for themselves in fuel savings in just 18 months, this is a powerful incentive to obtain and utilize these technologies.

The Canadian and U.S. governments recognize the importance of energy efficiency and the need for resources and subsidies to make it happen.

Types of Incentives