Transportation TIP List – March 2015

With March Madness coming to an exciting conclusion, we’re taking a quick “timeout” to make sure you’re up-to-date on the most current compelling stories in the transportation industry. The focus of this month’s TIP list is the future - from cyberattacks and new technologies, to a possible radical transformation of the “traditional” supply chain, these articles have us looking ahead and thinking about some very exciting things to come. Read on to discover the trending topics from the past month!

  1. ATA Calls on FMCSA to Make CSA Improvements: Criticisms of the Compliance, Safety, Accountability program at a recent U.S. Senate subcommittee hearing should hasten action by the FMCSA to make important changes to the program, including revising the program’s Safety Measurement System methodology.  
  2. Carriers Threatened By Cyberattacks, Experts Warn: It turns out that the 15 top container carriers could currently be at risk of significant and damaging cyberattacks. “We ran penetration tests and we concluded we could walk into all of them,” said Lars Jensen, CEO of Seaintel Consulting and Cyberkeel. “So far, we have not found a system we couldn’t get into.”
  3. 13 Key Considerations When Selecting a 3PL and the Difference Between a 3PL & 4PL: When it comes to efficient and cost-effective transportation management, it’s crucial to work with a trustworthy 3PL. This article showcases 13 key considerations as you search for the 3PL that’s perfect for your company.
  4. US-Canada Truck Traffic to Get Faster Customs Clearance Through Agreement: The U.S and Canada recently signed a historic agreement establishing the framework for pre-clearance processes at U.S.-Canadian border crossings, marking the first time pre-clearance will be available for all modes of transportation — land, rail, marine and air — in both countries.
  5. Intermodal Freight Market Facing Big Challenges: Intermodal freight movements are finally recovering since a tentative agreement was worked out between West Coast Port workers and shipping companies, but diversions of freight from the West Coast are expected to continue.
  6. White House Launches Textile Manufacturing Initiatives:  President Obama has announced nearly $500 million in public-private investment to strengthen American manufacturing by investing in technology through a new, textiles-focused manufacturing institute competition led by the Department of Defense.
  7. Economy Still Sending Mixed Signals as Capacity Crunch Looms: Some economic indicators have not bounced back as well as others in the recovery from the Great Recession, but trucking seems to be doing well. However, experts still advise preparation for the "mother of all capacity shortages” that’s set to appear during the 2017 to 2019 time frame.
  8. Target to Cut Thousands of Jobs, Invest $1 Billion in Supply Chain & Technology: Target plans to save $2 billion over the next two years as part of its efforts to grow and increase profitability with operations, technology and process improvement savings, supply chain and sourcing efficiencies and restructuring.
  9. Gulf Of Mexico Poised For Oil And Gas Production Growth: The Gulf of Mexico (GOM) accounts for the majority of oil and gas production on the Outer Continental Shelf, and the Bureau of Ocean Energy Management has announced that its proposed GOM Lease Sale 246 would offer all available unleased areas in the Western GOM Planning Area for oil and gas activity.
  10. Traditional Supply Chains to Undergo Radical Transformation by 2025: Traditional supply chains will radically change over the next five to 10 years as a result of new technologies, competition and customer demands. On average, companies expect to invest heavily in new supply chain technologies over the next two years, with the top 17 percent spending over $10 million.

Did we leave out any key topics? Get in the game and let us know what would be on your TIP list this month!

A Preview of Shipper Symposium 2015 – Lucky #13!

With spring temperatures (hopefully!) right around the corner, it can only mean one thing: our annual Shipper Symposium will be here before we know it! We’re lucky enough to be hosting our 13th signature industry event that brings together the brightest minds in transportation. Built upon educational excellence, the Shipper Symposium means attendees are learning from each other, sharing their experiences and insight on national and local supply chain challenges and digging into opportunities to uncover efficiency and cost savings.

We couldn’t be more excited about the lineup of speakers this year. From a revolutionary business strategist to an economist to GM’s chairman of the board and a CEO who is the leading authority on sleep and performance, this year’s Shipper Symposium won’t disappoint.  Catch a sneak peek on a couple of our keynote speakers that are sure to favor the bold come this May.

Tim Solso is Non-Executive Chairman of the Board of General Motors. He was elected to the Board of Directors in April 2012 and began his role as Chairman in January 2014. Mr. Solso began a 40 year career at Cummins Inc. in 1971. He was Chairman and CEO of Cummins Inc. from January 2000 until his retirement on December 31, 2011. Under his leadership, Cummins became a Fortune 250 company that designs, produces and sells diesel engines, power generation equipment and related components worldwide. The company currently does business in more than 190 countries and territories. Among his recent honors, Mr. Solso was honored as the inaugural winner of the Mitch Daniels Leadership Foundation prize. He was named a top five finalist to Marketwatch’s CEO of the Decade and to the Barron’s list of the 30 Most Respected CEOs. At the Shipper Symposium, Mr. Solso will talk about embracing change as well as ways to better evaluate operating performance. 

David Malpass is president of Encima Global, an economic research and consulting firm serving institutional investors and corporate clients. Formerly Bear Stearns’ chief economist, Mr. Malpass’s work provides insight and analysis on global economic and political trends, with investment research spanning equities, fixed income, commodities and currencies, and he will offer up his insight into the challenges and opportunities facing today’s economy at the Shipper Symposium. A frequent public speaker and television guest, Mr. Malpass authors a Current Events column in Forbes magazine, and his opinion pieces appear regularly in the Wall Street Journal. He sits on the boards of the New Mountain Finance Corp (NYSE ticker NMFC), UBS Funds, and the Gary Klinsky Children’s Center, and is a past director of the Economic Club of New York, the Council of the Americas and the National Committee on U.S.-China Relations.

Members of the Transplace team will also be taking the stage to share some industry insights and expert opinions. Transplace CEO Tom Sanderson actively takes a role in watching for over-regulation by government entities and wasteful initiatives that affect transportation, and will be sharing some of the latest regulatory challenges and how they can be addressed to better the industry. Brooks Bentz, president of Transplace Consulting Services, will also be speaking on the exciting formal launch of Transplace’s North American consulting services practice.

Attendees can take part in a multitude of educational breakout sessions, including a session on “Electronic Data Interchange (EDI) and the Power of Shipment Monitoring in the Supply Chain.” This panel discussion includes Transplace Executive Vice President and Chief Technology Officer Vincent Biddlecombe, who will focus on how real-time network visibility is more critical than ever before due to today’s complex supply chain networks, and will share how a Transportation Management System (TMS) can help achieve this visibility.

In addition, the session “3D Printing, Drones & Driverless Trucks – Creating a Futuristic Supply Chain” is sure to be compelling.  Moderated by the founder and host of Talking Logistics, Adrian Gonzalez, the panel will explore how drones and driverless trucks are changing the future of transportation, and how they will eventually impact the entire supply chain industry!

In our opinion, May can’t come soon enough! We look forward to hearing from these great speakers and many others listed on this year’s agenda. Finally, you can expect plenty of exciting breakout sessions and activities taking place at the 13th annual Shipper Symposium on May 4-6 at the Four Seasons Las Colinas! Register for the Shipper Symposium here or find out additional details on our speakers and view our agenda here.

Be sure to follow us on Twitter (@Transplace – you can follow/use the #TPSS15 hashtag!) and/or Facebook to keep up with all of the latest news and event updates. 

What are you most looking forward to at the 2015 Shipper Symposium?

Real Talk: The Capacity Crunch and What You Can Do About It

Capacity constraints can have a significant impact on a company’s transportation and logistics activities. While 2015 is faring better than last year, we all know it can be fleeting. And with produce season right around the corner, capacity is going to start tightening up again. Effectively planning for short-term and long-term capacity restrictions can mean all the difference when it comes to service and transportation costs.

LEFT TO RIGHT: GEORGE ABERNATHY, DAVE MADDOX

LEFT TO RIGHT: GEORGE ABERNATHY, DAVE MADDOX

Given this timely topic, we tapped two transportation experts to discuss current capacity conditions as well as best practices. One of these experts is George Abernathy, who has 30+ years of experience in transportation including working at asset-based companies such as J.B. Hunt. Currently, he is President and Chief Commercial Officer for Transplace. Our second expert is Dave Maddox, Vice President, Sales for Capacity Services, who has both asset and non-asset based experience including stints at Southern Freight, National Freight and Hogan Transports among others. 

Below you’ll learn what they both think about current capacity conditions and what their recommendations are for how to best balance your freight.

Q: Compared to last year, how do you see 2015 shaping up in terms of capacity challenges?

George: Right now, the capacity in the current market is relatively available as compared to last year. However, I think it’s going to tighten up in the near future, especially in the South when we hit produce season.

Dave: The good news is the economy is better. The bad news is it’s inevitable that we’ll see capacity constrained again in 2015. Currently, we’re seeing a ton of bids come in and carriers have rated everything, knowing there’s not enough capacity to be able to take it on. While shippers may have nice routing guides in place, they are already deteriorating in the current market. Why is this happening? Because carriers are finding themselves positioned on multiple routing guides of shippers on alike lanes. This becomes an issue when the same carrier or carriers are on multiple routing guides, but don’t have multiple trucks to handle shipper requests. At the same time, the acceptance rate when tenders come down from shippers starts high for carriers and then goes down. And when it is down, shippers start looking to non-asset based providers. These issues start to impact capacity and can really impact planning.

Q: What can shippers do when capacity tightens up?

George: Regardless of current conditions or moving into seasons that cause capacity constraints, shippers should look for mode shift opportunities to take freight off the road and put it into intermodal. In addition, you should maintain a percentage of freight with a broker or two so you can go under the market average and secure rates lower than your contracted rates.

Dave: You have to be prepared. Preparation is going to lead to execution that will be most effective during a tighter market. No matter what, there are going to be routing guide challenges so you’ve got to have a broad-based portfolio of carriers that includes a non-asset strategy. You’ll be better off accessing a much broader group of carriers. By having a non-asset strategy, you can be thoughtful and strategic in your mode shifts and conversions. Especially if what you’ve been doing isn’t working, a dedicated pop-up should be considered vs. trying to obtain success the same way you’ve always approached your transportation. And like George mentioned, you have to consider alternative modes. For example, maybe incorporating a rail strategy east of the Mississippi becomes a standard practice.

Q: What is the best strategy for approaching a capacity constrained market?

George: Ultimately, there is no set formula or right answer. But I do think there should be a strategic balance of asset and non-asset providers to handle a shipper’s freight. Forward-thinking shippers build into their procurement strategy an appropriate percentage of freight to be managed by brokers. Capacity has tightened the requirement for shippers to be flexible around non-assets. You want a broker on your routing guide. Why? Because whatever percentage a shipper’s identified by the broker to handle, needs to be included in the routing guide scenario so that their costs can be controlled. There is an ever expanding number of brokers. Contracting with a broker or two and a non-asset provider or two is a best-in-class strategy and makes good sense.

In addition, you want to avoid the spot market and unappealing pricing as much as possible, so use reputable brokers that will be responsible and required to meet rates and service levels. These brokers can help you avoid the spot market. Equally important is having access to small and medium sized carriers. This is what the non-asset provider can give to the shipper - access to very broad and deep carrier relationships. It’s hard to manage a routing guide effectively with 1000 to 2000 carriers vs. 100 providers. It’s these brokers that can provide access to those thousands of carriers that are small and medium-sized carriers. It’s a balancing act that is really dependent on your strategy.

Dave: 2014 was a rough year. One that I’m sure many don’t want to repeat. In order to not let that happen again, work with a non-asset provider to be better protected. Look for providers that have relationships with carriers everywhere across the U.S. For example, we’re helping our customers that have a back-log on the West Coast due to the recent port congestion to leverage a non-asset approach. One of our shippers has had some issues with a current asset provider to execute their drayage and export goods from Los Angeles to elsewhere overseas. This shipper needed to better protect themselves and not place all their eggs in the proverbial one type of asset basket. So we’re assisting with their freight movement from a DC in San Diego to the port in L.A. Remember, your movement of goods doesn’t have to just be by standard traditional truckload. Look for ways to incorporate non-traditional strategies to move goods and protect yourself when capacity tightens.

Q: Final thoughts and recommendations on how to weather capacity constraints?

George: Bottom line – no matter what your strategy is in navigating the balance between service and rates, a non-asset strategy is an absolute requirement. A prudent shipper with the right balance of asset/non-asset providers will be much more capable of reacting to whatever capacity is in the market. What we’ve seen are the shippers who are prepared no matter what happens do much better. Maybe a few years ago they gave up a little bit of savings on looser capacity, but it served them well when it tightened up in 2014. Short-term gain wasn’t worth the long-term loss. And that’s important in this industry.

Dave: Most of the transportation economists describe a high likelihood that capacity will be similar to 2014 over the next 2-3 years for a number of reasons. Our experience tells us that a non-asset strategy and better balance is the right thing.

To learn how companies are taking advantage of capacity opportunities now to better balance their freight, visit capacityservices.com.

How do you feel about current capacity conditions? How are you prepared if it tightens up? What will be some of the short-term as well as long-term effects on your business?

Transportation Optimization Opportunities in the Oil and Gas Industry

By Keith Richard, Vice President, Operations, Transplace

Oil and gas is a truly unique industry. From its world-class production technology to its incredibly diverse needs, those who work in oil and gas have seen many changes over the years.  Most have probably faced some very unique supply chain challenges, such as having to make a delivery to latitude-longitude coordinates (sometimes deliveries can be miles into a vast ranch in a very remote area).  And because the industry also operates 24/7/365, operators must sometimes secure equipment on a hot-shot basis due to the cost of operations, as it can be a tremendous loss if an oil well goes down.  Unlike other industries, those working in oil and gas have to deal with constant, round-the-clock pressure.

In light of these particular challenges, one way the oil and gas industry can reap significant benefits is by embracing order management as well as planning and transportation management technology. Generally speaking, many companies in the oil and gas industry are not taking advantage of technology like a Transportation Management System (TMS) to manage their complex supply chain against different fields, plays and business units in North America.

One of the biggest benefits a TMS provides is compliance and visibility, which is critical for many oil and gas companies and can help lead to streamline supply chain operations including improvements in safety, service and costs. Oil and gas companies truly need a value-based, efficient and cost-saving offering that helps them control their transportation network and arms them with the tools to help them do their job more effectively. By utilizing a TMS, oil and gas companies are constantly supplied with critical supply chain data, ensuring that they’re using the right carriers at the right price every single time, while at the same time finding real opportunities to drive cost out of their network and improve safety.

And while there are a few outliers whom excel at the management and execution of their logistics networks, a majority of oil and gas companies understaff and woefully underinvest in important areas that make up their transportation and logistics function. Managing and optimizing a supply chain is also about commitment to continuous improvement and sustainability, not just spot rates or short term savings. Better supply chain management can benefit the oil and gas industry as a whole in several important ways:

  • Better visibility to where materials are at all times and when they will arrive helps to achieve reliability through the entire supply chain. It provides oil and gas companies the flexibility to control their entire transportation process.
  • Better access to data and business intelligence allows companies to achieve better carrier performance and compliance and reduce cost. 
  • Improved optimization, which also equals more capacity on the market. This is truly valuable during the current capacity and driver shortage.  The expansion of the oil and gas industry has put a capacity strain on the market, making it all the more important for companies to ensure they’re leveraging technology to optimize their network.
  • Enhanced safety, which is a huge concern in the oil and gas industry, but not just on the job site. The inability to provide trucking companies enough lead time to get the product to a well site has a significant impact on service and safety.  Using a TMS system can greatly improve and enhance these areas.
  • On-going leadership, management and oversight of the carrier contracting and procurement process. Using a collaborative model in working in conjunction "with” the field operations teams using an incumbency model with current providers while providing the operations staff with a routing guide and TMS application to manage the tender process. 
  • Flexibility and support of daily operational expedite environment. By using a TMS application in conjunction with control tower oversight, oil and gas companies will have the ability to “sustain and enhance” their supply chain process.
  • Compliance and control. Using of state of the art business intelligence tools, companies will have analytics for measuring compliance to operational and tactical standards, as well as strategic thought leadership. The key is using a “non-intrusive” structure in supporting a dynamic operational environment.  

To hear more about strategic and tactical best practices for the oil and gas industry, tune in to the Talking Logistics live episode on March 24th. 

How are you leveraging technology or optimizing your supply chain network to reap both short-term and long-term savings?

Canada-Mexico Transportation Heats Up – What You Need to Know

John Kelly, President of Transplace Canadian Division

Canada-Mexico trade continues to heat up thanks in part to the growing number of company’s near-shoring operations to North America, particularly to Mexico, from Asia. The rising cost to produce in Asia, as well as the cost of ocean and air transportation continuously increasing, port congestion and demand on speed to market are all contributing factors. Not only is Mexico becoming a preferred country for manufacturing specific commodities like flat screen TV’s and medical devices, we’re seeing it responsible for a lot of assembly. Even though goods are being made in Asia, those same goods are then assembled in Mexico to then be shipped into the U.S. and Canada.

Issues Impacting Canada-Mexico Transportation

Capacity. A continual issue, capacity challenges aren’t going to go away. The fact that there is more freight than available trucks or drivers to move it is an issue, but we’re also seeing imbalances of goods coming in and out of both Mexico and Canada. Capacity issues will fluctuate depending on the region, so shippers need to plan ahead on where prices might be affected in terms of cost to secure capacity.

Driver shortage. With the aging population and drivers retiring, the driver shortage issue experienced in the U.S. is also an issue in Canada. Employee retention and training remains critical factors in helping thwart driver shortages and subsequently, capacity constraints. 

Declining Canadian dollar. Back when the Canadian dollar was at .75-80 cents, Canadian exports were robust. Canadian exports made it attractive for U.S.-based carriers to service Canada knowing there was quality paying loads to get back to the U.S. After the 2008 recession, the Canadian dollar rebounded to above par to the U.S. dollar putting the brakes on Canadian exports to the U.S. The Canadian dollar has fallen back to levels that make Canadian exports more attractive. This is great for Canadian exporters, but now you have one more country looking for capacity from U.S. carriers. Canadian carriers are seeing stronger revenues as there is a slow shift in exporting from Canada as a back haul to a regional head haul.

Regulatory issues. Whether its changes to the Hours of Service (HOS) regulations for U.S. truck drivers or the FMCSA’s CSA Safety Measurement System scores for fleets, U.S. transportation regulation issues have a definite impact on Canadian transportation. These regulations have and will continue to exacerbate and constrict capacity, causing both shippers and carriers to adjust their practices.

Mexico to Canada Transportation (and Vice Versa) = Route of Opportunity

There’s a robust market for transportation from Mexico to Canada. With Mexico sourcing growing, as previously mentioned, there’s a great opportunity to manage and bridge the (U.S.) gap. How do you do this? It comes from how you manage freight. By being in control of freight flows and equipment, you have an opportunity to grow your business. You don’t need to own the asset, you need to be “freight flow data rich”.

To step back, shippers should look at their supply chain and transportation in its entirety not only from a cost standpoint, but also from the viewpoint of value on customer experience around supply chain execution. Mexico to Canada transportation may not be the largest spend in many organizations, but likely is a disproportionate amount of time to manage.  So Mexico to Canada (and vice versa) transportation should be a core strategic move to leverage spending and equipment utilization in other markets to fund/support growth in these types of growing markets.

Where Do You Start?

First, open up the lines of communication with your transportation strategy leader. Second, get your 3PL involved with senior level planning to share corporate deliverables and at the same time develop with them a performance measure that puts you on a path to achieve these goals. Third, ensure you’re partnering with the right 3PL. This means you’re gaining access and visibility into capacity as well as opportunities to integrate with other customers and equipment to run leaner and smarter.

Are you exploring Canada to Mexico and/or Mexico to Canada transportation opportunities? What are your biggest challenges? Opportunities?