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A few years ago, I wrote a blog about some of the major changes that were and still are shaping the world of Sales (http://www.dantranscon.com/index.php/blog/entry/does-your-trucking-company-still-need-an-outside-sales-force ). In that blog, I suggested that economics, technology, and customer requirements were raising questions about the value proposition of an in-house sales team in the freight transportation industry.

A few days ago, I read an article posted by the Business Guru Club (https://businessguruclub.info/outsourced-sales-management-how-does-it-work/ ) that made the argument that Sales is a functional area like Accounting. Companies can benefit by outsourcing their Sales operation as they do their Accounting activities to a for-hire third party.

“For small businesses trying to launch their own sales department can be very difficult, time consuming and above all – risky. If sales don’t start to come in and you have to dismiss staff a lot of time and money has been wasted and this could break the business.”

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Freight matching services or “freight exchanges” have become one of the hottest topics in Freight Transportation over the past few years. Venture capital funds, private investors and others have poured at least $200 million — and potentially substantially more — into dozens of on-demand freight start-ups, including Flexport, Transfix, Loadsmart, Convoy, Doft, Cargo Chief, TugForce, HaulHound, Parade, Ship Lync, Load Surfer, FreightCenter, Freight Finder, Freightera, Freightcom, Pickmyload and others. There are new companies entering this space on a nearly daily basis.

Uber, the controversial but successful online taxi app, has recently announced that it is entering the freight matching arena. What is the attraction?

A brief history of freight matching services

DAT (which is an abbreviation for Dial-A-Truck) was the original load board in North America that was created in 1978. TruckersEdge was founded after DAT and was acquired by TransCore in 1992, another internet pioneer in load board services. Truckstop.com and Getloaded.com were launched in the early 2000s. In 2001, DAT was purchased by TransCore. In 2004, TransCore was acquired by Roper Technologies. In 2014, TransCore DAT became DAT Solutions. For four decades, this group of companies has been offering, for a fee, a process for shippers and brokers to post loads that need to be moved and for carriers to highlight available capacity.

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Donald Trump. Robotics. Omni-Channel Fulfillment. The New NAFTA. Freight Marketplaces. Autonomous Vehicles. The Internet of Things. Andrew Scheer. Brexit. Climate Change. Last-Mile Delivery. Legalized Marijuana. E-commerce. Emmanuel Macron. The Amazon Effect. Drones. Digital Freight Management. Uber. Clean Energy. This is just a partial list of the major forces shaping the world of Freight Transportation in 2017.

This year's Surface Transportation Summit (www.surfacetransportationsummit.com) will focus on the strategies and tactics that shippers and carriers can employ to address these forces. The event will take place at the International Centre in Toronto on October 11. This is a joint venture between Newcom Business Media and Dan Goodwill & Associates with the support of the Freight Management Association of Canada and the Canadian Trucking Alliance. Northbridge Insurance will be the Gold sponsor, with Navistar, Volvo Trucks and Isaac Instruments, the silver sponsors and Trailer Wizards, the bronze sponsor.

In a year when political and economic alliances, new technologies and environmental policies are changing rapidly, the Summit will provide strategies and tactics to address these forces.  Here is an overview of the agenda and speakers.

The first track is entitled, The Donald Trump Effect and The Economy in 2018: What trends will impact your business? Carlos Gomes, Senior Economist with Scotiabank, will share data on the Key Economic Indicators for 2017 and then provide his insights into the economy in the New Year. John Larkin, one of America’s foremost transportation industry analysts, will share his thoughts on the some of the most important developments in the US transportation industry. Walter Spracklin, Equity Transportation Analyst, RBC Capital Markets, will provide his insights on the Canadian transportation industry.  Sylvie Messier, Corporate Transportation & Customs Manager, IPEX and Doug Munro, President and Owner, Maritime-Ontario Freight Lines Limited will share their thoughts on this topic in a panel discussion.

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The freight brokerage industry has been near and dear to my heart for many years. Earlier in my career, I had the privilege of running one of Canada’s largest 3PL operations. My current company has had the distinct pleasure of consulting with some of North America’s finest freight brokers. Periodically I like to look at the changes that are taking place in this industry. In previous years, I have published blogs (http://www.dantranscon.com/index.php/blog/entry/technology-comes-to-the-freight-brokerage-industry-in-2016 ) on the impact on technology in the freight brokerage industry. Times have changed.

Technology is no longer a driving force in this industry. It is THE DRIVING FORCE. This year we are witnessing the application of technology to every facet of the business. This industry has been discovered by venture capitalists, entrepreneurs, truckers, software, and hardware providers. Software innovations are entering the industry at a very rapid pace. This blog will feature a range of companies that are at the forefront of transforming the industry.

Find an App

Posting a shipment has never been easier. Friendshippr.com (http://friendshippr.com/) turns your Facebook friends into a shipping network. The Friendshippr app, available on Google Play, or from Apple store, is a simple tool to move goods between your Facebook friends.

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b2ap3_thumbnail_Estes---Saia_20170407-192111_1.jpgThe big news on the LTL scene in Canada over the past few weeks has been the severing of ties between Estes Express, the number 14 ranked carrier (on the Transport Topics list) in the United States and TST Overland Express, a large Ontario-based LTL carrier that is one of the major divisions of TFI International (formerly known as TransForce), Canada’s giant trucking conglomerate. This is a partnership that has endured for many years.

Estes Express Lines will be teaming up with two regional Canadian less-than-truckload carriers to offer LTL freight services to Canada under an Estes freight bill. Estes will be working with Speedy Transport of Brampton, Ontario, and Pacific Coast Express Ltd. (a division of the Landtran Group) of Surrey, British Columbia, to offer Estes Canada service. The new alliance will start May 22, according to Estes.

The company stated that U.S. shippers will work with only one carrier, Estes, from pickup to delivery, and all freight will be delivered on an Estes delivery receipt. In effect, Speedy Transport and Pacific Coast Express will become agents of Estes. When asked what drove the need for Estes to convert its Canadian service to a direct model, Ed Alderman, Vice President, International and Offshore Sales for Estes, said Estes wants customers to have the same quality Estes customer service experience from shipment to delivery as they have come to depend on domestically.

As reported in Transport Topics, Estes said it is forming dedicated account teams in Canada to provide the same service level that U.S. customers receive. Freight will move across the border in Estes pup trailers equipped with captive beams and Estes’ proprietary Webb walls. This direct method of cross-border shipping is meant to reduce handling of freight and decrease risk of damage, the company said.

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Last week I wrote about the consolidation that is taking place in the freight transportation industry in Canada. Thank you for the many positive comments and feedback. I hope the blog has stimulated some thought about the level of competition in the industry, in view of its domination by some very large players.

One of my longstanding colleagues in the industry, who runs an independent transportation operation in Canada, reminded me that there are a range of very fine companies that compete with the industry giants. As a follow-up to last week’s blog, I thought I would provide an overview of the competition in each sector.

As a starting point, I went back over the top 100 for hire fleets in 2016 as published in Today’s Trucking. They range from Canada’s largest trucking fleet, TFI (TransForce International) with over 26,000 pieces of equipment and almost 25,000 employees to the 100th largest company, Transport Matte, with 321 pieces of equipment and 135 employees. It should be noted that there is a steep falloff after you go from TFI to even the second-place carrier, Mullen Group, that has 13, 645 pieces of equipment and 4410 employees. Clearly, TFI is in a class by itself with not just the most trucks but with by far the largest number of fleets under one roof.

The other big fleets highlighted in the previous blog (i.e. Manitoulin, Day & Ross, Mullen) have also grown disproportionately large through a combination of organic growth and/or acquisition. A glance through the top 100 list displays a range of companies, large and small. So let’s take a look at the major freight transport sectors in Canada.

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The subject of online freight bids and internet freight auctions came up a few times at the Surface Transportation Summit that took place in Toronto on October 13. The carriers that raised this topic spoke of the high volume and poor quality of bids that have been hitting the transportation industry this year. One carrier was so fed up with the internet auctions in which they were participating that they made a decision to opt out of them.

It is clear that where there is a market opportunity, there are a multitude of companies that are seeking to meet the needs of unsuspecting shippers. It was apparent from the carrier comments that there are a number of unqualified or underqualified, unprofessional providers, some with very limited expertise, who are providing an unsatisfactory service to their customers and a disservice to the industry. These are some of the issues that were brought to light.

There are bids on the market where the carrier is being asked to quote on 6000 lanes of traffic, a massive undertaking. In one case, the carrier was provided with shipment data that stated that there are 1600 truckloads of freight that move on a particular lane each year. The carrier that is the incumbent, looked at their data and noticed that they move only 160 LTL shipments on the particular lane each year.

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On September 23rd, Logistics Management hosted a webinar at which time the co-authors of the annual Masters in Logistics study presented their major findings. For 25 years, this study has been gathering data from a large sample of shippers and carriers across various levels of spend and size. The three presenters, Karl B. Manrodt, Ph. D., Professor, Georgia College, Mary Holcomb, Ph. D., Professor, University of Tennessee and Tommy Barnes, President, Project 44, highlighted some major changes taking place in Freight Transportation.

E-Commerce is changing the Freight Spend Allocation across various Modes

In 2015, 21.9 percent of freight costs were spent on over the road truckload shipping while 21.7 percent were spent on LTL shipping. In 2016, these percentages declined to 17.8 percent for truckload and 15.0 percent LTL freight. Surface Parcel (i.e. FedEx Ground, UPS) increased year/year from 6.1 percent to 11.5 percent. Small parcel freight volumes increased by one percent. In another area of the study, the researchers revealed that 10 percent of freight shipments move from a DC direct to consumer while 21 percent now moves direct from a plant direct to consumer. This further reinforces the impact that E-Commerce and omni-channel marketing are having on freight activity.

Organization Structures are adapting to Market Dynamics

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The first blog in this series looked at the money saving opportunities for organizations that take control of Inbound Transportation. This blog will outline a series of steps that need to be taken to make this happen.

A Commitment to Act

In the last blog, it was highlighted that some vendors place a mark-up on their outbound freight costs (viz. your company’s inbound freight expenses) and pass it on to their customers. It is important for every company that receives inbound freight to understand the following.

A trucking company adds a mark-up to their costs in order to come up with their freight rates. A freight broker and/or logistics service provider will take the carrier’s rate and add another mark-up. In other words, by the time you receive shipments from your vendors, they may have from two to four mark-ups added to the basic cost.

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b2ap3_thumbnail_dreamstime_xl_9421932.jpgManaging Inbound Freight is often overlooked or not optimally managed as an opportunity for cost savings in many companies. This is a conclusion we have come to after working with a range of companies and industries over the past 13 years. When we are invited to meet with a manufacturer or distributor of freight, the priority is usually finding cost savings on outbound freight, not inbound freight. This seems to be the result of several factors.

First, many companies are not able to determine how much they are paying for inbound freight. Freight costs are often embedded in the “landed cost” of the products; the actual freight cost component is not identified. Many companies have poor visibility into their inbound freight activity.

Second, some companies don’t care about their inbound freight costs. They take the landed cost of their inbound shipments and add a markup. They are satisfied with this approach.

Third, some companies are concerned about upsetting their vendors by asking them what they pay for freight. These companies may be very dependent on certain vendors for specific products and have a perception that by engaging in a dialogue on freight costs, an area that the vendor has historically managed on their own, this may encourage the vendor to give priority to other customers. In some situations there is the perception that because the vendor is a large company, they are able to negotiate better rates than the manufacturer receiving the goods.

Fourth, companies often have a Transportation or Logistics Manager who is responsible for outbound freight; inbound freight is managed, unmanaged or mismanaged separately by the purchasing/procurement department. Shippers who take charge of Inbound Freight Transportation can achieve savings in a number of areas.

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Freight costs represent between two and five percent of revenue in many manufacturers and distributors. They are typically the single largest supply chain expense. When transportation costs begin to escalate, the Transportation department and the Transportation leader can become the “whipping boys” for senior management.

Over the years, we have observed that the companies that are most successful in managing freight costs tend to have a collaborative work environment. They understand that successful freight cost management is most effective in companies where all of the key operating departments - - - Sales, Purchasing, Production, Warehouse and Inventory Management, Customer Service, Transportation and the Customer work together. In other words, freight management is a team sport.

When we visit a new shipper client, there are four things that we typically look for at the outset. They are a:

• 12 month Freight Budget

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Every few years I like to take a look at some of the new technology-based entrants to the freight transportation industry to see who are the “movers” and “shakers.” While Amazon dominates the headlines, there are a host of other companies doing some very interesting things in the technology space.

This blog will look at some names that surfaced in the past and some of the new players that are taking freight brokerage to a new level. While new technology is being applied to a variety of freight related tasks (i.e. calculating freight dimensions, dock appointment scheduling), this blog will examine some of the companies are actually in the business of moving freight. They are bridging the asset world with the technology world. I have selected a group of companies that have caught my attention. They are Cargomatic, uShip, Freightera, Freightquote, FreightCentre, Uship, Project44, Logistical Labs and ZRATE.

Cargomatic

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Back in the 90s, I had the privilege of leading Canada’s largest Intermodal Marketing Company. Since that time, I have been a big supporter of this service. In our consulting work with shippers, we are often struck by the fact that this service remains undervalued and underutilized. The purpose of this blog is to challenge shippers to revisit and rethink their company’s intermodal activity and help them craft an effective plan within their supply chain strategy.

While intermodal service provides various benefits, the top advantage is that on longer lengths of haul (i.e. over 1000 miles), it typically costs less than over the road truckload service. While transit times are longer in some (but not all) instances, the economies of moving multiple containers on an intermodal train usually provide shippers with a cost advantage. When compared to truck transport, lower fuel surcharges and less exposure to driver shortages are also beneficial.

Over the past decade, all of the class 1 railroads in North America have invested heavily in their Intermodal terminal network and service offerings. As an example, a few years ago, CN Rail built a rail facility in Prince Rupert, British Columbia, the closest North American port to Asia. That port allows for the movement of intermodal containers on a single-line CN train from Prince Rupert across Canada or through Chicago as far south as New Orleans, LA. Here are a few steps to consider in preparing an effective intermodal strategy.

Step 1 – Revisit your vendor and customer service requirements

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b2ap3_thumbnail_Sample-Routing-GuideV1_20160429-193844_1.jpgMany shippers don’t achieve the cost savings they expect from their freight bid exercises. This can happen despite the time, energy and costs that go into these projects. Based on our work with shippers over the past twelve years, these are the main reasons why this happens.

A Failure to Provide Full Disclosure of Requirements and Expectations

As a prelude to the execution of a freight bid, shippers are required to gather and document the scope of their freight transportation requirements. For carriers to bid properly on a shipper’s freight, this goes well beyond volumes, lanes and transit times. Carriers need to understand everything about the pick-up, linehaul and delivery operations. Unfortunately, this does not always happen. The omission of certain requirements can lead to erroneous carrier selections and turmoil after the bid has been completed and the freight has been awarded. Here is one example.

Some shippers require early morning (i.e. 7:30 AM) deliveries. Not all LTL carriers are able to supply this service in all locations on a consistent basis. If carriers are not informed of this requirement in the RFP and then expected to meet this requirement in certain locations after the bid has been awarded, this can lead to service failures and pressure to bring back the incumbent (s).

A Failure to Gain Buy-In and Support from all Divisions and Sister Companies

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The first part of this blog focused on the operational, service and equipment issues that constitute a strong shipper-carrier freight agreement. This blog will address the financial and business issues that need to carefully captured in detail.

6. Rates and Service Charges

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Recent stock market and currency value declines in China and Canada point to a challenging year ahead for the economies of these two countries and many others around the world. While the United States has remained fairly stable amidst current world turmoil, its high valued currency may slow exports to its key trading partners. If business levels deteriorate this year, this will place added pressure on shippers who are trying to manage their freight costs? Is this a year to conduct a freight bid?

Certainly faltering economic conditions typically encourage manufacturers and distributors to conduct RFPs to keep freight costs as low as possible. Beyond the general state of the economy, there are a usually a range of conditions that set the stage for a successful freight bid. Here a few to consider.

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There are a host of economic indicators that provide economists, academics and transportation professionals with insights into how the general economy is performing. Data on gross domestic product, imports, exports, housing starts, stock market trends, consumer confidence and unemployment levels are barometers of the level of economic activity in a particular country. These indicators, while somewhat indirect, highlight trends in the economy. Declines in unemployment levels indicate more people are working and as result buying more goods and services. Increases in housing starts suggest that a growing number or people are buying homes, furniture, appliances and carpets. These indices correlate somewhat with freight transportation activity levels. The same applies to other measurements of economic activity.

However, these types of general economic indicators, while helpful, don’t necessarily provide direction as to the specific segments of the economy experiencing the strongest or weakest growth. They don’t shed light on whether there are higher levels of growth in dry van, refrigerated or flat bed traffic.

As a result, transportation professionals need to turn to other indices to understand where the freight industry is going. Some of these measurements are outlined below.

1. ISM Managers’ Index (https://www.instituteforsupplymanagement.org/ )

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As everyone knows, it is very difficult to time the stock market. While we are all aware of the old adage, “buy low and sell high”, in reality, this is not easy to do.

When it comes to freight rates, it is sometimes problematic to select the right time to put a company’s freight out for bid. The last few years have been particularly challenging for shippers. After the Great Recession, carriers have been adding capacity in a prudent and deliberate way. Gone are the days when carriers build transport companies and hope that shippers will come. In addition to managing their fleet capacity, carriers have also been challenged with the struggle of recruiting qualified drivers.

Consolidation in the trucking industry has been very prevalent in recent years. In Canada, companies such as TransForce have acquired large chunks of the small parcel, LTL and truckload sectors. There are simply fewer carriers for a shipper to choose from. Carriers have gained pricing leverage over the past few years.

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A company’s freight costs often represents between two and ten percent of total revenues. For many companies in the manufacturing, distribution and retail sectors, their freight spend has a direct impact on their bottom lines. Nine years ago I wrote a blog with the title above. In that blog, I identified one of the consistent problems we encounter in working with shippers on a day to day basis, namely a lack of complete and accurate information on their freight transportation activities.

Nine years later, this problem persists and it is not limited to just small companies. In fact, many companies with freight expenditures of five to fifty million dollars or more face the same problem.

The challenge now is that freight companies have figured out that if they use their scales and dimensioning devices, they can weigh and measure the freight they move more accurately. If shippers have poor practices that hinder the flow of their assets, they can calculate the cost of these deficiencies. They are now charging more aggressively for these additional costs and for the precise cubic space occupied by the freight. As a result, carriers can and are securing revenue that they may have missed in the past.

What is interesting is that some of these shippers have high quality ERP and accounting systems. However, when you try to extract a year’s worth of freight transportation data, you receive a file that is riddled with errors and omissions.

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Throughout this series of blogs, the focus has been on how Best in Class shippers ensure their freight is delivered at the right place, at the right time and intact. The beauty of freight management is that so much about transportation is measurable. Over the years we have observed how Best in Class shippers pull away from mediocre performers and industry laggards in the area of measuring performance. They tend to have better data and more robust and relevant tools and reports. These are some of the Key Performance Indicators (KPIs) and Reports that they utilize.

Macro Financial Indicators

The first set of financial ratios helps identify trends in supply chain costs and their impact on the business over time. Key ratios include:

Supply chain costs as a % of Revenue

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