American Shipper released a new study on Freight Procurement Strategies on June 29, 2011. The study was sponsored by JDA. The results were based on research conducted in May of this year. Data was gathered from over 300 shippers in the manufacturing and retail sectors. Here are some of the key findings.

Freight Costs are on the Rise

Fifty-eight percent of the study participants indicated that their freight costs increased by over 5% in 2011. This compares to 48% in 2010 and 25% in 2009. Seventeen percent experienced a rate increase of less than five percent in 2011 while the comparable figures for 2010 and 2009 were 15 and 12%. The rest of the sample experienced no increase or a decrease in rates. Forty percent agreed to an increase of over 5% on their contract rates in 2011. This compared to 46 and 10% in 2010 and 2009 respectively. Thirty-one percent accepted a rate increase of less than 5% on their contracted rates this year as compared to 17 and 14% for the years 2010 and 2009 respectively.

More Protracted Rate Negotiations

This year rate negotiations are being extended over a longer period of time. Fifty-three percent of the respondents indicated that in 2011 their freight negotiations were completed in less than two months. In 2010 and 2009, the comparable figures were 63 and 70% respectively. Forty-four percent of the sample reported that their negations took 3 to 6 months this year. This compared to 32 and 27% respectively for 2010 and 2009.

I have long been a fan of intermodal transportation since the days I ran one of Canada’s largest IMCs. I continue to monitor developments in this sector with great interest. My sense is that the Intermodal industry, which consists primarily of the railroads, IMCs, shipping lines, draymen and truckers, is positioning itself to take the next big leap forward. Here are some developments to watch.

Shipper Knowledge

Despite all the media attention that intermodal service has garnered over the past 10 or 15 years, there are still a significant number of shippers that are hesitant to switch from truck service. In some cases they were “burned” by service failures in the past and are reluctant to give intermodal a second chance. For other potential users, it is a case of unfamiliarity. This will continue to change.

Some high volume shippers that move boxcars and do their homework will observe that the cost per ton or per pound of using intermodal service as compared to boxcar can be quite attractive on some corridors. While this can pose some challenges for companies on rail sidings that are accustomed to receiving their goods via rail, the economics can sometimes make the switch worth their while.

Diesel Fuel Costs

Beginning the week of July 5, Mexican trucks are being allowed to operate in U.S. territory under a new deal between the two countries. The deal was a result of an agreement between Mexican President Felipe Calderon and U.S. President Barrack Obama, putting an end to a decade-long trade dispute between the two countries. The original transportation chapter in the North American Free Trade Agreement between Mexico, the U.S. and Canada, allowed Mexican trucks to travel on U.S. highways starting in 1995. But the U.S. refused to allow this provision to take effect, citing security concerns over the Mexican trucks and drivers.

The agreement will provide several benefits to American business. U.S. exporters have pushed for a new agreement since Mexico imposed $2.4 billion in tariffs on U.S. goods after a Bush-era trucking project was shut down.Mexico will suspend 50 percent of its punitive tariffs within 10 days, and suspend the rest when the first Mexican carrier in the program receives operating authority. Mexican tariffs currently range from 5% to 25% on certain U.S. agricultural and industrial products.

The deal is expected to "significantly" improve the competitiveness of Mexico's transportation and export sectors, which target the U.S. as its main market. About 70 percent of Mexican exports are shipped by road. This will allow for much more options in transport that will make Mexico more competitive and at the same time reduce the transportation costs significantly. The expectation is that this should improve the flow of Mexican goods into the United States by making them more cost effective.

The first trucks enrolled in the program could operate within the U.S. as early as the end of August according to Federal Motor Carrier Safety Administration officials. U.S. Transportation Secretary Ray LaHood signed the agreements in Mexico City, infuriating opponents of an agreement that independent truckers and labour groups believe will bring lower-cost and poorly supervised Mexican operators into competition with American drivers.

The agreement will operate similar to the current U.S. arrangement with Canada. Mexican drivers will only be allowed to deliver into America and pick up loads going back to Mexico. They cannot pickup and deliver loads that are not international shipments for their own country.

American truckers see several problems with this arrangement. Many U.S. truckers may not want to go into Mexico as a result of the danger posed by the drug cartels. This could make this a Win for Mexican trucking companies and a Loser for American truckers. If, and when, American truckers decline the hauls going to Mexico, that pretty much gives the entire market to Mexican trucking firms.

In the “Money” section of the June 30 issue of 50plus, there is an article entitled 5 top tech trends for the post-PC era. “The PC’s place in our lives is slowly being usurped. New technology won’t just complement our trusty desktops and laptops — it will eventually take over,” say experts.   "We’re now living in the post-PC era," stated technology guru Walt Mossberg, tech columnist for the Wall Street Journal.

“So what exactly is this post-PC era we’re embarking on? While personal computers drastically changed how we work and play, experts say we’re already outgrowing them. In the future, we’ll increasingly turn to devices like tablets and smart phones to do many of the things we now do on our computers. Those in the know say this transition to a multi device era is going to be a long one.

Computers will still have a place in our lives, we’ll just be using them less often — and buying fewer of them. For instance, instead of buying a second computer, consumers may put that money towards a tablet instead. Instead of upgrading or replacing their PC more often, users will get more life out of their computer by focusing on complementary devices.” Market research firms like Gartner are predicting a slow down in the PC market in the next decade.

Speaking at Ideacity 2011, Mr. Mossberg outlined 5 top tech trends in this post-PC or multi-device era. I have taken the liberty of adapting some of his ideas to the transportation industry.

#1 The internet will become invisible

As the years go by, there is an increasing amount of useful content appearing on the internet. Some of it is designed specifically for truckers and much of it is free or available at a very reasonable price. Here are a few sites that can help trucking companies improve their performance and better manage their businesses.

Big Truck TV (http://www.bigtrucktv.com/)

This very well designed website contains a host of useful information for fleet executives. The website is organized by topic (Environment, Technology, Human Resources, Maintenance, Safety and Regulations, Fleet Operations, Meet the Experts, Finance, ATA, Video White Papers). Each section of the website has a host of video presentations from industry experts on topics ranging from how to open a successful brokerage operation to how to run an effective tire retread program to “how to pick freight that works for you” to how to know your costs and when to say “no” to how to improve driver recruiting. This website is loaded with very valuable information for trucking companies of all sizes.

Key Performance Indicators (www.kpilibrary.com)

This handy website is organized by industry sector. One of the sectors is Transportation and Warehousing.   KPIs are listed and each one is defined. Sample KPIs include on-time pickup and delivery, transit time, profit per truck, ratio of fixed to variable cost per truck, ratio of corrective versus preventable maintenance per truck etc.). The KPIs can be grouped into segments (e.g. Cost Leadership, Customer Intimacy, Operational Excellence, Cost/Service Differentiation). The website outlines the most popular KPIs and allows you to create a customized KPI Dashboard. You can only manage what you measure. This website helps trucking companies select those key measurements that can improve profitability.