Last weekend I was struck by an interview on leadership lessons in The New York Times.  It appeared in the “Corner Office” column of the Sunday Business section.  The interview was conducted with Tracy Matura, general manager of the Smart car division of Mercedes-Benz USA.  During the interview, Tracy was asked a question about what she asks prospective candidates whom she is seeking to hire.  Here is what she said.

“Tell me who your favorite boss was and why, and tell me who your least-favorite boss was and why.” Tracy commented that this gives you a sense of what leadership style works best for this individual.  “I would also then ask them about a time they took a risk and failed.  I have never hired people who have told me they’ve never failed.  You don’t learn if you don’t fail.” 

The interviewer then challenged her on the issue of whether anyone ever admits that they have never failed.  Tracy responded by saying that people might say, “You know, I don’t think I’ve ever really had a complete failure.  Really.  I don’t even ask the question in terms of just business.  Everybody has had some failure in their life.”

This led the interviewer to try to understand the underlying rationale for the question.  This was her response.  “Here’s what I want:  My leadership style is to be transparent and authentic, so if you’re going to tell me you’ve never failed, then it makes me wonder if you always hide your failures.  I don’t like that - - surprises are bad for everybody.  I can’t fix or try to fix something I don’t know about.  Some people have that fear factor if they admit to failure, as if they say to themselves, “If I say I failed, she’s going  to think I’m a loser and not hire me.  Quite the opposite.”

While Ms. Matura’s comments reflect what she is looking for in a prospective employee, the person being interviewed has an obligation to try to determine the management style of the prospective boss.  In order to make this assessment, the interviewee needs to ask a similar set of questions.  “Tell me about the employees you hire with whom you have had the most successful relationship and why, and tell me about the employees you hired that were the least successful and why.  How would you describe your leadership style?  Please share with me some of your teams’ successes and failures.  How do you describe your goal-setting process, how do you measure results, how do you communicate those results and what is the performance review process?  Also, please describe the work environment that you try to create.”

For the past several years I have been a participant in and fan of LinkedIn.  It is an amazing social media tool for business.  Recently I have joined and studied the discussions in a variety of LinkedIn freight transportation groups.  There are many of them available to transportation professionals.  Some deal with LTL freight, procurement, load postings, networking and recruitment, to name just a few. 

Since Best Practices in Surface Freight Management is a passion of mine and a focus of my business, I thought it would be valuable to create a separate group to exchange ideas on this important topic.  Effective today, I have launched this group on LinkedIn. 

The Mission of the Group

Freight Management Best Practices welcomes transportation professionals interested in sharing, developing and implementing innovative and cost effective Best Practices in Surface Freight Transportation.  We encourage members to discuss the challenges, opportunities and changes facing shippers and carriers in the freight transportation industry.  Our goal is facilitate the sharing of knowledge and create a dialogue between shippers, carriers and other industry professionals.   The intent is to identify and improve processes, to reduce inefficiencies in order for shippers to derive the best value from their transportation spend.

Topics for Discussion

CSA 2010 was created by the U.S. Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) to remove unsafe commercial drivers from the America's roads.  CSA, short for "Compliance, Safety and Accountability," uses a complex methodology to rate motor carriers on safety. It incorporates a "Safety Measurement System," or SMS, that assesses a trucker's on-road performance over the most recent two-year period and indicates whether the assessment should prompt the agency to dig deeper into the carrier's operational fitness. 

The SMS includes seven "Behavior Analysis and Safety Improvement Categories" known as "BASICs." Embedded in the seven categories are more than 640 infractions that a driver and vehicle can be cited for. The SMS database is populated by data generated from roadside inspections triggered by infractions such as speeding on an interstate or state highway. A speeding violation gives law enforcement "probable cause" to pull a truck over and conduct what is known as a walk-around inspection of the vehicle and driver. Any infractions that are then found will accumulate as points on a company's safety "scorecard," which is updated monthly. 

Fatigue Driving (hours of service), Vehicle Maintenance and Unsafe Driving are the three areas of most concern.  Should the point total exceed the FMCSA's threshold for safety compliance, government inspectors will conduct an in-house audit or intervention of the company's operations. From there, a determination will be made if the driver is fit to continue behind the wheel.  American, Canadian and Mexican carriers are all subject to inspection.  An estimated ratio of 1 in 5 carriers is at risk of an intervention.

The CSA program is expected to have multiple impacts on the freight industry.  While the system is imperfect and controversial, it is projected to move 10 percent of America’s 3.5 to 4.0 million drivers out of the industry, exacerbating the driver shortage that already exists.  It will likely have an impact on insurance costs and driver training costs.  Cost increases coupled with fewer drivers will serve to drive up freight rates that are already on the upswing due to the improving economy and carriers’ reluctance to make fleet additions.

The question for shippers and freight management companies is where do CSA scores fit in the selection and procurement of freight transportation services?   Concerns over legal liability seem to be playing a role in carrier choice.  A late 2011 shipper survey conducted by Morgan Stanley & Co. found that 55 percent of those polled were afraid to use a carrier if even one of its seven BASIC scores came in above the CSA threshold. If those shipper attitudes become more entrenched, carriers with a positive safety history but a poor CSA record may be “blackballed” and pushed out of business, according to the program's critics. 

Much has been said and written about the Great Recession and its impact on the freight market.  The question on the minds of many shippers, carriers and consultants as we approach the end of quarter 1, 2012 is what is the current state of the freight recovery and where are freight rates going?  When one tries to assess the state of demand for freight services and the level of capacity, how do these compare to pre-recession levels?

This week considerable light was shed on this topic during a webinar hosted by the Journal of Commerce.  The webinar focused on the current and projected state of supply and demand in order to provide some insight into projected changes in freight rates over the next 6 to 18 months.  Here are some of the highlights.

John G. Larkin, Managing Director, Transportation & Logistics Equity Research at Stifel Nicolaus made the case that retail sales (excluding food) in America, despite lingering high unemployment have returned to pre-recession levels.  The ISM Purchasing Managers’ Index has been above 50 since January 2010, signaling a growing economy.  The Weekly Market Demand Index (MDI), a measure of relative truckload demand, has been In favour of the trucking industry since January 2011.

Large fleets (with greater than $30 million in revenue) are now at 9.5% below their capacity at the peak (Dec.06) while smaller fleets are 17.9% below their peak (in December 2003).  Drawing on other sources, Mr. Larkin highlighted that truck fleet removals are forecast to remain at historically low levels.  Since peaking in May 2007, the number of LTL power units has declined 19.3% as of December 2011.  October and November 2011 saw slight year-over-year increases in the tractor fleet, which had last occurred in March 2008, but December 2011 reverted back to a slight year-over-year decline.

Drawing on data supplied by the American Trucking Associations, Mr. Larkin then showed that after the huge disconnect in 08 and 09, with truckload capacity tightening, truckload demand and supply have come back into line. Surprisingly, Mr. Larkin’s data also showed that LTL demand is now exceeding supply. 

Over the past week, there has been a barrage of comments posted in one of the Procurement groups in LinkedIn on the topic of why so many of these activities fail.  For those of you interested in this topic, please sign in to the group or read the following blog prepared by Tony Colwell, Executive Interim Manager and Director at Acuity (Consultants) Ltd.   (http://acuityconsultants.com/wp/2012/01/avoiding-the-pitfalls-of-centralised-procurement-18-reasons-why-procurement-cost-saving-initiatives-fail-to-deliver-to-the-bottom-line/). 

In Tony’s blog, he tabulates the results of 311 comments that he received.  For those of you who take the time to read the postings in the LinkedIn group and Tony’s summary, you will see a fair bit of commonality.  For the benefit of the readers of this blog, I will take the ten most frequently mentioned reasons for failure and elaborate on them based on years of experience in dealing with shippers on freight RFP projects.

1. Cost Inaccuracies/True Costs not understood

My company has confronted this problem repeatedly over the past eight years.  In many shipper organizations, the freight transportation data is not clean and well organized.  The data may or may not include fuel surcharges and other surcharges.  In some cases, it is not possible to discern whether the freight costs include or exclude fuel.  A lack of standardization of fuel surcharge formulas may further impede the work of calculating an accurate base cost estimate and detailed lane data.

2. Poor Planning and Leadership/Unclear Objectives