Trucking 2010: Destination Unkown

Just as predicted, the new year has ushered in a new set of predictions.

At least one of the big questions of 2009 has been answered in the way of a successful debt-for-equity swap. YRC remains the largest contender in the trucking ring (for now) and its mere survival will be the final blow for many weakened carriers that limped through the final rounds of 2009. At least that’s one prediction.

How will YRC affect rates in 2010? According to Wolfe Research, as cited in a January 7 issue of Journal of Commerce (JOC), less-than-truckload (LTL) rates will begin to firm by the second half of the year – regardless of whether YRC remains open for business.

According to shippers surveyed by Wolfe Research, LTL rates are expected to remain flat as long as YRC continues operations. If the nation’s largest carrier closes mid-year, those surveyed believe rates would go up by 5.7%. And, if the company continued under Chapter 11, rates are believed to increase by an average of 2.7%.

And what about truckload rates? As noted in another JOC article (January 7, 2010), Morgan Stanley says there’s no immediate forecast for higher rates as loose capacity and 2009 contract renewals continue to temper pricing. The firm predicts low- to mid-single digit increases in revenue per loaded mile by the second half of 2010.

As cited on fleetowner.com, investment firm Robert W. Baird Co. concurs. The firm’s transportation and logistics analyst, Jon Langenfeld, foresees rates rising 1% to 3% for truckload and 0% to 2% for LTL.

While freight rates won’t be spiking within the calendar year, 2011 may be a different story as capacity exits the market, via additional carrier bankruptcies, and the economy continues its upward climb.

Regardless, industry veterans know there is no use in predicting where over-the-road transportation will take us. I believe 2010 will be an interesting, perhaps pivotal year. That’s my prediction.

Driving While Distracted

We’ve all seen it and some of us have done it – eating, drinking and even texting (OMG!) while driving. It’s tempting to do. We live in a fast-paced, impatient world that necessitates multi-tasking and embraces wireless technologies (and drive-through windows).

But we’ve got to stop.

Distracted driving has become such an epidemic that the government has launched a campaign, and a Web site, to educate the public. The site posts some surprising stats, i.e. in 2008, 5,870 people in the U.S. were killed in crashes involving driver distractions such as texting, cell phone use, eating and drinking.

Unfortunately, the problem is not contained within compacts, SUVs and sports cars. Commercial drivers are also eating, drinking, phoning and texting while driving. And although driving while distracted can be deadly on many levels, the effects increase exponentially when bus, truck and railcar operators figure into the equation.

You may recall the Los Angeles train engineer whose texting caused the worst domestic train crash in 25 years. A total of 25 people, including the driver, were killed and 135 others were injured. The engineer sent a text message 22 seconds before the accident occurred. Earlier that day, he received 21 text messages and sent 24 messages in less than two and half hours – while he was running the train.

The DOT says it is not distracted. According to Transportation Secretary Ray LaHood, the department is focusing efforts on rulemaking that will address distracted drivers. In November, LaHood said the DOT is working on a rule that would “consider banning text messaging and restricting the use of cell phones by truck and interstate bus operators.”

Meanwhile, 19 states and D.C. have banned texting while driving and six states and D.C. have banned the use of hand-held cell phones. But we need to see this enforced on a national level, especially in regards to the buses and trucks that traverse our highways, as well as the railcars that cross through our communities. And sooner is always better than later.

We’ll keep you posted on the DOT rules. Meanwhile, we urge everyone to drive safely. And if you happen to be reading this while driving, please pull over. THNX!

Dreaming of a Green New Year

While many people are dreaming of a white Christmas, LMS is eyeing a green new year. Yes, we’re expecting another year of fiscal growth, but that’s not the kind of green we’re talking about. We’re talking about going green. . . getting lean and green . . .in other words, being environmentally friendly.

According to Logistics Today, nearly 74% of a company’s carbon footprint stems from transportation and logistics. As a non-asset-based 3PL, LMS doesn’t own trucks. However, we move freight on behalf of countless companies – we optimize their ship plans, map the routes and hire the carriers.

The EPA recognizes this, which is why they created the SmartWay Transport Partnership for providers like us. As a SmartWay Transport Partner, we have been recognized for helping reduce harmful emissions while committing to further reducing our carbon footprint in the years to come.

How do we do it? We consolidate shipments into efficient, fuel-reducing routes and we work with SmartWay carriers who strive to attain environmental and fuel efficiency goals. If you haven’t already, check out the SmartWay site. It is loaded with information, including strategies that can help reduce fuel use.

We joined SmartWay in 2009 and, even as we watch the snow fall outside our corporate office in St. Louis, we are looking forward to a green 2010.

Rates are Down, But Shippers Can’t Afford to Be Shortsighted

It’s no secret that shippers are in the driver’s seat when it comes to freight rates. Obvious economic conditions have forced carriers to lower prices in hopes of filling trailers and riding out the recession.

Is this the best time to renegotiate rates? Many shippers think so; carriers are reporting dramatic increases in bid requests. LMS has also seen increased interest in its reverse-auction freight bidding tool, TOTALBid. After all, shippers are trying to shelter themselves from the same storm. Companies are scouring operations in a desperate search for cost reduction opportunities and cutting freight rates seems like a no brainer.

Regardless of market conditions, shippers should rebid annually, especially if they’ve added new lanes that have not been subjected to a bidding process. Bids also create an opportunity for shippers to update routing guides and solidify backup carriers.

But yes, I think now is an especially good time to talk rates. Capacity is loose and the market is competitive. However, the idea is not to beat down carriers. Remember – carriers are our supply chain partners and without them nothing moves.

So what can shippers do?

Identify core carriers and talk to them. Call them, meet with them, check on their business. Ask: How can we help each other?

When offered reduced rates, use them. Give these carriers your business.

Create carrier-friendly routes, i.e. continuous moves, so they can reduce empty miles and keep trailers moving.

Cutting costs is important, especially now, but shippers can’t afford to be shortsighted. Economic indicators are slowly improving and it may not be long before carriers return to the driver’s seat.

Mexican Trucking Controversy: Thinking Beyond the Border

Take a moment to check out the things around you – everyday items you keep on your desk, at your office and in your home. Take a close look, a really close look. I’m confident you’ll find that most of your belongings are attached to labels that read “Made in China,” “Made in Indonesia” or “Made in Mexico.” These labels tell us what we already know – America actively participates in a global economy.

Knowing this, I am surprised by the degree of controversy that surrounds the yearlong cross border trucking demonstration project. Established in September, this FMCSA-sponsored program allows select Mexican trucking companies to move freight beyond the 25-mile border zone. Up to100 Mexican carriers can operate freely on U.S. roads. In turn, approved U.S. carriers can travel throughout Mexico.

The obvious opponents, which include labor groups and independent truck owners, cite concerns over safety issues. But the project began only after the U.S. DOT Inspector General determined the FMCSA had taken necessary steps to ensure safety and confirmed the agency plans to check every truck that crosses the border as part of the pilot.

The FMCSA is also coordinating its efforts with a number of organizations and many participating Mexican carriers already operate in major cites such as El Paso and San Diego.

The pilot program is just that – a pilot. The idea is to test the waters before diving into a full-fledged border program that could compromise our roadways. I trust this initiative will be the impetus that leads America and Mexico to a sound cross border trucking program.

And the benefits are there. Since 1982, Mexican carriers have used the 25-mile zone to transfer freight to their U.S. counterparts. According to Logistics Today, these drop-and-hook operations run as high as $400 million a year. Supporters say opening domestic roadways to our southern neighbors could save American consumers hundreds of millions of dollars. Also, shippers could enjoy shortened lead times, less freight handling and more on-time deliveries, which translate into additional consumer benefits.

If we are going to participate in a global economy, we must be prepared to take the necessary steps to create safe, efficient and cost-effective trading. It’s almost hypocritical to do otherwise. Let’s not forget that we work and live in a global marketplace . . . the proof is all around us.

No Ties Allowed!

I hate ties. I wore a tie for the first 20 years of my career, so when I became my own boss in 1996 I swore I’d never wear one again.

I am proud to report that my tie selection is sparse. I have a few, but they are reserved for weddings, funerals and the like.

My employees know of my aversion to neckwear. They too are not allowed to wear ties. Years ago, one of our managers came into the office wearing a tie. I grabbed a pair of scissors and, much to his co-workers’ amusement, I cut it clean in half. He and I still laugh about it, but he never wore a tie to work again.

I guess it’s not so much the accessory, but what it suggests – stiff, stuffy attitudes. I take pride in the fact that LMS is not stuffy. Yes, we are professional and yes we take our jobs very seriously, but we also have fun. For years I worked in offices that were anything but fun.

I believe that people are more productive, and definitely more creative, when they work in an environment that is a little more relaxed. We have cubical decorating contests, we eat pizza and watch ESPN at lunch and once a year we wear black in honor of Johnny Cash Day.

We are a successful company with an unusually low employee turnover rate. I like to attribute this to our commitment to make LMS a place where people want to work. And regardless of how large our company becomes, I refuse to lose that; and no matter what, I’ll still refuse to wear a tie.

TMS Shop Talk

I may be a bit biased in saying this, but one of the best articles I’ve read on purchasing a transportation management system (TMS) was written by LMS’ Tracy Meetre. The article, “TMS Shopping Made Simple” appears in the April edition of Inbound Logistics magazine.

Tracy knows what she is talking about because she was part of the LMS team that shopped for a TMS before we decided to create our own system. LMS hasn’t always been a technology and execution provider. When we opened shop in 1996 we specialized in executing transportation strategies and we used our clients’ technology to do so. As a result, we worked with a myriad of systems with varying degrees of transportation management functionality. Our hope was to find that one TMS that would meet shipper needs.

Well, we never found that TMS so we decided to create our own. Deployed in 2001, LMS’ Web-native TMS, TOTAL (Transportation Optimization Through Analysis and Leverage) does everything from order management and freight optimization to load tendering, shipment tracking and performance reporting – and a lot of other stuff, but I’ll refer you to our Web site for all of those details.

So now TMS shoppers are calling on us and taking our technology for a test drive. We receive a lot of request for proposals (RFPs) and no two are alike, which further illustrates the complexity of the TMS market. So if you are in the market for a TMS, be sure to check out Tracy’s article. Also, be sure to check out LMS’ TOTAL; it’s a great TMS with numerous benefits and that’s my unbiased opinion.

Too many truck drivers on the road?

My last trip to the Lake of the Ozarks took a little longer than usual. Several weekends a year I like to load up the car and head downstate to enjoy a slower pace and more scenic surroundings. And, like most people, after a high-paced work week, I’m anxious to get to my weekend destination – as are my friends and family traveling with me.

Well, midway through this last trip we found ourselves inching along I-70. Our car was sandwiched between two seemingly endless lines of tractor trailers. Frustrated with our progress, one of my friends said, “There are just too many truck drivers on the road!” I turned to him and said, “Actually, there aren’t enough.”

Of course my friend looked at me as if I was crazy, but those of us in the transportation industry know I speak the truth. There aren’t enough truck drivers and, in the not-so-distant future, we could find ourselves facing an acute truck driver shortage.

I tried to educate my frustrated passengers; I reminded them that everything we have came to us via a truck – and a truck driver. Clothes, food, even cars are delivered by trucks. In fact, I challenged them to think of something they own that did not spend some time on a truck. After quite a bit of thought, they could not think of a single thing. I have to say they were a bit surprised by the idea.

According to the American Trucking Association (ATA), the long-haul segment of the trucking industry has a national shortage of 20,000 drivers. Given current demographic trends, the ATA predicts the shortage will increase to 111,000 by 2014. I don’t have to tell you how this could affect the economy.

Why the shortage? For one, a favorable labor market finds potential drivers opting for jobs that keep them home. A construction job may be more attractive to someone with a young family. Additionally, according to an article on the ATA Web site, many truck drivers are aged 55 or older and the primary driver demographic, which is men, aged 35 to 54, will remain flat or even decline over the next several years.

But it’s not just about finding drivers. It’s about finding qualified drivers. And the industry has increased its security and safety standards, which means finding suitable driver applicants is even more challenging in a post 9/11 world.

The drivers are out there, the industry is just going to have to work harder to recruit them. How many young people do you know seeking a career in truck driving? We need to spread the word about the trucking industry and the vital role it plays in our economy. The ATA has a great public relations campaign slogan, “Good Stuff – Trucks Bring It.” I’d like to see more of this kind of messaging.

The industry will also have to recruit beyond its traditional demographic to tap women and minorities. According to the ATA, women currently represent 5% of truck drivers and African Americans and Hispanics represent 11.7% and 9.7% (respectively) of long-haul drivers.

Finally, the ‘what’s in it for me’ factor has to be there. Carriers will need to raise the bar in terms of driver salary, benefits and quality of life. Though the need for drivers has increased, driver pay scales have not kept pace with those in other industries where working conditions are often more desirable. However, some carriers are creating schedules that are move home-friendly and upgrading cabs to include comforts like satellite radio and Internet access so drivers can keep in touch with friends and family. But will it be enough?

As members of the transportation industry, it is our job to promote the important role truck drivers play in our economy. And next time you hear someone complaining about the number of trucks or truck drivers on the road, give them a quick education. Remember, “Good Stuff – Trucks Bring It.”

Multi-shipper collaboration: All talk and no action?

One of the best quotes I’ve heard in a while came out of the CSCMP Annual Conference during a presentation by Dick Armstrong, chairman and CEO of Armstrong & Associates. When the topic of supply chain collaboration came up, Dick said, “Collaboration is a lot like sex in high school. Everyone is talking about it but no one is doing it.”

It’s true. We hear and read a lot about collaboration within the supply chain, but we don’t know of many companies that are actually doing it. Why? While collaboration can lead to fiscal and service improvements, the road to collaboration nirvana has a few sizable speed bumps. Participants must address a variety of issues that can range from technology interfaces to change management. But the good news is that a collaborative program can be carried out successfully – it just takes some forethought and planning.

LMS understands this process because we facilitate collaborative transportation programs. With planning and proper facilitation, we’ve found these programs produce cost and service benefits for all participating companies. For example, we can link one-way truckload moves into cost-efficient continuous move routes. One of our larger initiatives involved LMS client Monsanto and a supply chain partner. In fact, we presented this case study at the annual CSCMP conference in October.

Yes, collaboration is happening at Monsanto and beyond, but it’s not enough. A warming economy, rising fuel costs and cooling capacity levels have created an uncomfortable climate for today’s shipper. However, shipper collaboration programs can temper these conditions while delivering cost savings and service improvements. In my opinion, there’s never been a better time to explore the collaboration concept.

So let’s talk less and do more . . . starting with LMS. For one, we’ve created an online freight compatibility survey that helps shippers identify potential collaboration partners. It spots origin/destination similarities, compatible freight classes, and corresponding mode types that exist among interested shippers. Some people have likened it to a dating service for freight. Regardless, this is the first step in helping companies determine their collaboration eligibility and it initiates important discussions about collaboration.

LMS also hosted a Collaborative Consortium in August to give shippers the opportunity to discuss freight collaboration opportunities and challenges. In fact, the compatibility survey was a result of this workshop. Among those companies represented were Emerson, Danaher Motion and Monsanto. The workshop confirmed our belief that shippers are ready to pursue collaboration – as long as key issues, such as safety, service and data confidentiality are addressed. Participants also felt a pilot, perhaps using stock transfers, would be the best way to begin a collaborative program.

The ultimate goal is to create a large and varied community of shippers that can leverage their collective freight activities to benefit all participants. As a third-party provider, we can facilitate the program to ensure data confidentiality and proper savings distribution, but we want shippers to drive the program.

So now I bring the challenge to you. If freight collaboration is something you are considering, get the ball rolling. Hold a meeting, gather your data and, of course, you can always contact us and/or take our freight compatibility survey, too. But most importantly, let’s commit to less talk and more action.

Growing Forward

Right now our systems administrator, John Ebel, has a lot of job security. This week John is in Florence, SC, where he’s setting up the communications infrastructure for our new Southeastern Regional Office. And just last month, he was in Rockwall, TX, prepping for the opening of our Southwestern Regional Office. My aim is to keep John traveling in 2007; my hope is that he has signed up for a frequent flyer program.

We’re only two months into the New Year and LMS has already opened two new regional offices. Though proudly rooted in St. Louis, we’re excited to expand into other regions and look forward to opening a total of six offices in 2007. As noted in the January 19 edition of the St. Louis Business Journal, we’ve got our sights set on several strategic markets, including Chicago and Los Angeles.

The new branches augment our current operations, which include our Supply Chain Solutions and Dedicated Services groups, but there will be a heavier focus on the latter. Our Supply Chain Solutions group caters to companies looking to outsource some or all of their transportation management technology and/or functions. LMS’ Dedicated Services group works with shippers with short-term freight management needs – anything from finding the ideal carrier to move a single load to managing a series of lanes on an ongoing basis.

LMS is opening these branches because we continue to see a need for the type of offerings provided by Dedicated Services. Market factors, such as rising fuel prices and tightening capacity levels, have complicated the carrier selection process. Now more than ever it makes sense to partner with a provider that has fingertip access to thousands of carrier rates and data. Additionally, companies benefit from our buying power and long-standing carrier relationships.

So keep an eye out for news of additional LMS offices. We are excited to have the opportunity to further serve our existing clients and bring new clients into the mix. Additional clients mean additional freight, which increases our collective freight spend and our buying power. And, additional offices also mean more logged air miles for John, who will probably need a vacation about this time next year.