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").

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.

For the past week I have been reading with great interest the postings on the LinkedIn Sales Management Group.  As of the date of this blog posting, there have been over 40 responses to the question, “What advice would you give a new salesperson”?  The tips offered were so good that I thought I would share a “reader’s digest” version with the followers of this blog. 

As I read these suggestions on a daily basis, I see two sets of users for these tips.  First, new sales reps should study this list and make sure they take action on every item.  Second, sales managers should take this checklist and cross reference it with their current (and future reps) to ensure they maintain a winning team.  Here are my 21 favourite tips for the new rep.

1. Achieve mastery of the services that you sell.
2. Achieve mastery in sales skills.
3. Seek out the top performers on your sales team and learn from them as to how they dress, their work ethic and their communication skills.
4. Understand how your services compare with those of your competitors.  
5. Be a great listener so you understand the needs of your prospects.  There is a good reason why we have two ears and one mouth.  Focus on understanding the needs of your customers so you can solve their problems. 
6. Get to know your prospects before you turn them into customers.
7. People buy from people, specifically people they like and trust.
8. Prospect, prospect, prospect.
9. Learn as much as possible about your customers.  The more due diligence you do up front, the easier it will be to close the sale at the end.
10. Be persistent and consistent.  Success comes from a strong work ethic.
11. Be passionate about your company and its services.
12. Try to sell solutions rather than products or services.  Learn your company’s value proposition and where it fits best.  Sell the value of your solution, not price.
13. Learn early on to distinguish buyers from non-buyers (i.e. lack of mutual fit/interest/resources, etc.).  This will go a long way towards increasing your income and your employer’s income while reducing customer acquisition costs.
14. View yourself as a profit centre.  To be successful, time management is critical.  Spend your time, energy and resources on the most viable opportunities in your sales pipeline.
15. Be ethical in all of your business.  Remember, you are selling your (and your company’s) credibility and integrity.  If you lose your integrity, you have nothing to sell.
16. Invest in yourself.  Continually upgrade your product and business knowledge and your sales skills.
17. At the end of the day, when all of the other sales reps have left the office, make one more call to a new prospect.
18. Acquire a CRM tool and use it faithfully every day.
19. If you are having difficulty in one or more areas of your sales pipeline, this is telling you that you have a weakness in specific areas (e.g. prospecting, obtaining appointments, asking for the sale). Take action to turn these weaknesses into strengths.
20. While the sales job can seem very lonely at times, don’t forget sales is a team sport.  Work closely with your manager and the rest of your team (e.g. drivers, dispatchers) to achieve your goals.
21. Always ask for the sale.  If you don’t ask, you may not get. 

I am sure there are many more tips that can be added to the list.  What advice would you give to new freight transportation sales rep?  I would love to hear from you.

This year’s Surface Transportation Summit will take place on October 16, 2013 at the Mississauga Convention Centre.   Please block out this date in your calendar.  We have some great speakers lined up for this year’s event.

The New Year will be an exciting one that will likely be shaped by the financial talks currently taking place in Washington.  Here are some of the key trends to watch for in the coming year.

1. The “Fiscal Cliff” Crisis may determine the level of the Economic Recovery in 2013

As the year comes to a close, America is facing a number of economic headwinds (e.g. high unemployment and underemployment, mismatch between job skills required/positions available) and tailwinds (e.g. possible rebound in the housing sector, potential revival of domestic manufacturing, boom in energy production, improving household balance sheets). Senior government leaders in Washington are trying to solve America’s so-called “fiscal cliff” that is casting a dark shadow over the economy. The resolution of this crisis may go down to the wire and will likely set the tone for the economic recovery, or lack thereof, in 2013.  Should America’s leadership come to a good understanding on tax increases and spending cuts, this will place the United States and probably Canada on a more solid path to an economic recovery, even if 2013 is not expected to be a year of robust growth. This will help shippers and carriers in all sectors of the economy.  A failure to reach an agreement, a weak agreement or an agreement to push the problem down the road, will put a damper on discretionary spending, consumer confidence and possibly shove North America and much of the world into recession.

2. America’s Energy Renaissance/ Fracking comes to the USA

America is going through an energy renaissance.  Induced hydraulic fracturing or hydrofracking, commonly known as fracking, is a technique used to release petroleum, natural gas (including shale gas, tight gas, and coal seam gas), or other substances for extraction.  Fracking is allowing America to produce increasing supplies of energy just as the Middle East, the world’s leading source for petroleum, has become increasingly volatile. 

The decision by Wal-Mart to conduct a pilot of a 60 foot high cube tractor-trailer in Ontario, Canada caught the transportation industry off guard.  The surprise is not so much that a newer and longer piece of trucking equipment is being trialed.  This was inevitable.  The surprise is that the initiative was driven by a large shipper and not by a Trucking Association or trucking company in Canada or the United States.    

The arguments in support of the trial are compelling and are the same arguments that were made when 53 foot trailers and every other innovation in transportation occurred.  A 60 foot tractor-trailer that offers 30 percent more cubic space promises to make the North American economy more efficient.  It places fewer trucks on the road, thereby reducing congestion and lessening the need to refurbish our existing highway infrastructure.  It reduces the impact of a driver shortage.  It would reduce fuel consumption and greenhouse gas emissions.  It permits drivers to accomplish more under HOS restrictions.  It would allow trucking companies to derive a better return on their investment.

The arguments against Wal-Mart’s pilot are the same as those made each time there is a proposed change of this nature.  The most frequently mentioned reservation is that this will make our roads less safe.  It will result in more highway fatalities.  The prototype trailer is not in compliance with existing laws in various jurisdictions.  There will be problems in backing up a tractor-trailer combo of this nature into many existing loading and unloading docks.  Longer high cube equipment will contain heavier payloads that will speed up the damage to our roads and highways.   It will require infrastructure changes to accommodate vehicles of this length.

While all of these comments deserve discussion, it must be pointed out that the transportation industry has dealt with all of these issues before.  Laws can be amended.  Loading areas can be reconfigured.  Bridge crossing can be modified.  Weight configurations can change.  It wasn’t that long ago that Ontario ran a trial on long combination vehicles (LCVs).  What makes a 60 foot tractor-trailer so different?

Perhaps the biggest issue is the impact that the widespread standardization of 60 foot equipment would have on the capital budgets of trucking companies and shippers who have their own fleets.  The industry has billions of dollars invested in 53 foot equipment.  With an economy that is less than robust, trying to “keep up with the Jones” by having to convert part of a fleet to 60 foot equipment is certainly not what the industry is looking for at this time.  This issue alone explains why longer tractor-trailer lengths have not been driven by the trucking industry.  A change of this nature would cost enormous amounts of money.  The cost alone creates a certain amount of inertia and resistance.