“Mundus vult decipi, ergo decepiatur.” –Latin proverb meaning “The world wants to be deceived; therefore, let it be deceived.”

So the price of crude oil is slipping now – dropping about $9 over the last two days, down to about $135 per barrel from a high of over $144 a barrel. Still hideously expensive, to be sure as oil cost only $87 per barrel in February this year. Yet this is definitely a very welcome trend for truckers that’ve been staggered by $5 per gallon (or more) diesel fuel costs for some time now.

Or is it?

Here’s my concern: We’ve got VERY short memories here in the U.S. on the order of, say, a gnat. For the first time in decades, we’ve managed to make a serious dent in our nation’s petroleum use. For the first time ever, oil inventories did NOT decline over the Forth of July holiday weekend – in fact, consumers used 1.2% less gasoline than the week before and 3.9% less compared to the Fourth of July in 2007. Doesn’t sound like a lot, but it’s the first time gasoline demand has dropped so significantly.

Yet if pump prices start dropping, will we revert to our old ways? I am not talking about truckers here – freight’s got to move – but about the general public, the folks that don’t NEED to drive as much. The ones who can take public transportation to work, or carpool, or telecommute; the ones (like me) generating enough extra demand to push U.S. imports of the black stuff up near 60%, compared to 30% thirty years ago.

Then again, maybe things aren’t what they seem. Maybe all the hype about speculators creating a “bubble” in the market, for example, aren’t the real reason for the spike in oil prices we’re experiencing. Some articles written by experts at the Cato Institute got me thinking about all this so let me share some of their analysis with you.

Alan Reynolds, a senior fellow with the Cato Institute and the author of “Income and Wealth,” says there is no mystery behind the rise in oil prices. “They rose too high too fast because of booming demand for oil for petrochemical products, electric power and shipping from many emerging economies, particularly China, India and the Middle East,” he explains. “Meanwhile, the supply of oil slipped in the U.S., Mexico, Venezuela, Nigeria and Russia.”

But now Reynolds says JPMorgan analysts estimate that oil will drop to $85 a barrel from 2009 to 2011. Even Goldman Sachs analyst Arjun Murti, who recently predicted oil might reach $200, later said oil will likely drop to $75 or less in the long run.

Why the change in outlook, you ask? Reynolds says the price of oil cannot reach $200. “In fact, that’s quite impossible: The world economy can’t handle current energy prices, much less a big increase,” he notes. “Which in turn means that oil prices will fall.”

In a column written for the New York Post, Reynolds points out that market analysts often claim oil prices are almost entirely determined by supply. Demand is said to be insensitive (or “inelastic”) to price. The standard example is that many Americans have to drive to work and most gas-guzzling SUVs will still be on the road even if the affluent few can trade theirs for a Prius. Whatever the price, we’ll pay it.

Reynolds believes this idea rests on two fallacies. The first is to exaggerate the U.S.’s importance when it comes to ups and downs in worldwide oil demand. In fact, America is using no more oil than it did in 2004. The second fallacy is to greatly exaggerate the importance of passenger cars in the U.S. – that’s not where we should be looking for serious “demand destruction” in his words.

“Two-thirds of petroleum in the U.S. is used for transportation - but half of the transportation sector’s fuel flows into commercial trucks, trains, buses, airplanes and ships,” he says. “As a result, only 44% of each barrel of oil is used to produce gasoline in this country, and some of that gasoline fuels business – delivery vans, landscaper trucks, fishing boats, industrial and farm machinery, etc.”

Most crude oil is used to produce diesel fuel for trucks, ships and trains, heavy fuel oil for industry, aviation fuel, asphalt, home heating oil, propane, wax, and innumerable petrochemical products ranging from detergents and drugs to synthetic fabrics and plastic, says Reynolds. In short, a huge share of crude oil is used to produce and distribute industrial products.

“That explains why the price of oil is extremely cyclical - that is, it tends to rise during economic booms and fall during contractions,” he notes. “It dropped 44% in the last recession (from November 2000 to November 2001), 48% from October 1990 to January 1992 - and 71% from July 1980 to July 1986.”

Note, too, the impact of a weak U.S. dollar, adds Steven Hanke, professor of applied economics at The Johns Hopkins University in Baltimore, MD, and like Reynolds a Cato senior fellow.

“For example, if the greenback had held its January 2001 value against the euro, oil would have traded at about $76 a barrel in May 2008,” he says. “This is almost $50 below the price that crude oil was trading at in May 2008. Accordingly, the decline of the dollar’s value accounted for a whopping 51% of the $97 a barrel increase in the price of oil from May 2003-2008.”

Oil prices have a huge impact on producers’ cost of production - profits and losses - not just on the cost of living for consumers, Reynolds noted. Nine out of 10 previous postwar recessions began shortly after a big spike in the price of oil. Yet those recessions always slashed oil prices dramatically, he stresses. “People who have been predicting both a nasty U.S, recession and $200 oil prices are contradicting themselves,” he says.

But note that a U.S. recession isn’t required to bring down the price of oil. All that’s needed is industrial stagnation or decline in many other countries. In the U.S. and Britain, industrial production is nearly flat - only 0.2% higher than it was a year ago. In many other countries, however, industrial production dropped over the past 12 months: down by 0.7% in Japan, 1.1% in Austria, 2.5% in Italy and Denmark, 2.9% in Canada, 5.4% in Greece, 5.7% in Singapore and 13.3% in Spain.

In April, industrial production also fell in India and China. Shrinking industry around the world shrinks demand for energy in general - and for oil in particular. “When the price of anything gets unbearably high, it discourages demand,” says Reynolds. “That has proven true of overpriced houses – and it will likewise prove true of overpriced oil.”

So demand is where it’s at – and with demand for fuel falling in the U.S., oil prices should follow, as they seem to be doing now. Let’s just hope we don’t leave the path we’re on in terms of lower consumption anytime soon.

“Fuel costs have almost tripled since 2004 and will most likely continue to rise. It’s no surprise [that] fuel is the number one operating expense in the trucking industry today.” – Curtis Whalen, executive director of the Intermodal Motor Carriers Conference, speaking at the Evans Network of Companies’ 4th annual agents meeting held in Washington D.C. July 2.

I talked to Bruce Stockton, vice president of maintenance and asset management for Con-way Truckload, about some of the changes occurring in over-the-road trucking due to high fuel prices. One of the more interesting things we discussed is how high fuel prices combined with stricter emission and engine idling regulations are forcing fleets to consider some radical new options for the future – options that aren’t limited to equipment specs, either.

(Bruce Stockton)

“We don’t just have the operating needs of the highway tractor to think about – we’ve got that 10 hour off-duty driver time we need to address as well,” he told me. “Right now, we’re all looking at different auxiliary heating, cooling, and power system options for the sleeper berth that don’t require us to idle the diesel engine. Question is, at what point does the technology and fuel get so expensive that it becomes much more economical to put a driver up in a hotel room?”

It’s not a random thought where Stockton is concerned. This is a guy that’s been thinking outside the box for a long time now – so long that it’s safe to say he lives outside the box. During his career with Contractor Freighters Inc. (CFI) – later bought by Con-way in August 2007 for $750 million and renamed Con-way Truckload this year – Stockton focused on developing the most fuel-efficient and cost- effective tractor specs for his carrier’s fleet.

He blends driver needs, fuel economy and cost of operation into a careful mix every year, searching for even small things that could be changed or deleted to give the tractors under his care a better efficiency footprint.

“We literally build a new truck every year, changing those specs that make sense in terms of fuel savings, driver comfort and acceptance, and operating costs,” Stockton explains. “Drivers are in many cases our best source of feedback and ideas because they are out there in the trucks every day, while we’re behind a desk.”

Prior to its acquisition by Con-way, CFI’s 2,100 company-owned fleet of trucks were a mix of Kenworth T-600, T-800 and T-2000 tractors that averaged between 6.5 to 7 mpg, with some drivers able to log 8 mpg. The carrier spec’d Michelin X-One wide base tires on its tractors, gaining a fuel economy improvement of 2/10th of a mile per gallon. Over the last several years, the carrier cut 675 pounds out of the vehicle, deleting items like corner fenders in front of the drive-axle tires (a savings of 75 pounds) and moving to horizontal instead of vertical exhaust stacks (a further 80 to 100 pound savings).

“Reducing idle time is a huge piece of our spec’ing challenge long term,” Stockton told me. “We don’t have impressive idle time numbers right now. We’re about 40% idle time without an APU [auxiliary power unit]. But we want a system that doesn’t produce emissions — which is why we’re looking at battery power [Kenworth’s battery-based ‘Clean-Power’ system to be specific] that is factory-installed.”

Yet there’s a flip side to his thinking here, too – why make all of these high-dollar truck technology investments in the first place? Why not instead put a driver in a hotel for a night – or even several nights – where they can shower, do laundry, watch cable television, access the Internet, etc. Maybe that is a cheaper option long term.

“That would really change our equipment specs,” he noted. You’re looking at going to day cab models, Stockton said, which would eliminate the weight of the sleeper compartment, could result in a smaller more fuel efficient engine, and lower both purchase price and operating cost per tractor unit as well.

One problem with the hotel room theory, Stockton quickly points out, is that there just aren’t enough hotels and motels near truck stops. “Maybe we build facilities with ‘pods’ for drivers, rented out for 10 hours that provide heat, cooling, a bed and a shower,” he says. “Structure a network of places like that, you’ll approach near-zero idling industry wide.”

He readily admits that the “pod hotel” concept might not be popular with drivers, much less fleets. Then again, with diesel over $5 a gallon throughout much of the U.S., coupled to nearly 30 states with strict five minute or less engine idling rules, it’s an option that might not fall on as many deaf ears as he thinks.

One thing is for sure, though – a range of new options, no matter how radical, needs to be considered. With the industry’s fuel bill predicted to top $135 billion this year – up from $52 billion in 2003, just five scant years ago – trucking needs to put as many options on the table as it can.

“I learned that courage was not the absence of fear, but the triumph over it. The brave man is not he who does not feel afraid, but he who conquers that fear.” –Nelson Mandela

Here’s another one of those topics you don’t want to touch with a 10-foot pole: dealing with bad employees. In trucking, however, we should note that doesn’t mean just drivers. We’re talking about dispatchers, safety managers, etc. – anyone in the carrier’s organization, even top level executives, can be a bad employee and make things grim. For it’s important not forget the old Army saying: that there are no bad units, only bad leaders – meaning many personnel problems start at the very top of an organization, not the bottom.

With that in mind, professor Jerry Osteryoung with the college of business at Florida State University has some thoughts on how to deal with bad employees – and, more importantly, how to define the term “bad employee” from the start. His advice covers mainly office-bound workers and so doesn’t necessarily translate to this industry. One thing’s for sure, though – the old adage “one bad apple ruins the whole barrel” really still applies these days. I’ll let Professor Osteryoung take it from here: Professor, the floor is yours:

“In a recent newspaper, there was a full-page ad by CareerBuilder.com that simply said ‘Bad employees have a way of making good employees bad!’ Of course, CareerBuilder’s ultimate motive was to get employers to use their site to find workers; however, their message could not have been more perfect. Badly behaved workers are, in fact, a contagious disease. If you ignore the bad behavior, it will infect the whole body and eventually destroy it.

The question that most entrepreneurs and managers have is, ‘What is a bad employee?’ This is often a complicated question to answer as one size does not fit all. For instance, some might say a bad employee is one who just does not achieve the required goals. However, with this kind of non-achiever, it is pretty easy to identify the problem and then develop a plan to ensure that the employee meets the goals.

Employees with bad attitudes are frequently the most difficult to judge. Generally, these employees do an adequate job, but they inject poison into the entire organization destroying morale. In cases like these, it is hard to zero in on what is wrong, but it is obvious that the employee is not right for the organization.

Other typical problems are workers who always come in late and workers who harass their colleagues. In these cases, your gut reaction is probably the best indicator. The bottom line is that there is a myriad of traits that can indicate a problem worker.

Many entrepreneurs leave the problem employee alone, simply hoping that the behavior will go away, because they just do not know what to do. However, if ignored, the problem will fester and grow until the entrepreneur can no longer deny it. At this point, the entrepreneur will be forced to take action.

In many cases, though, bad employees do not have to become or remain bad employees. By far, the best thing you can do when you recognize that there is an issue with an employee is sit them down and clearly explain why their behavior is a problem. Often it just has not occurred to the employee that their conduct is harming the organization and their colleagues. On countless occasions I have seen this simple step stop the problem from developing further.

Another method that works with problem employees is assigning them a mentor to coach them through their work issues. The mentor must clearly understand the employee’s issues and the goals you are aiming for.

Additional training frequently works for employees whose behavior cannot be corrected quickly. Sometimes when in a group training session, the light just goes on, and an employee is able to correct their behavior. Examples where this type of training can be helpful are harassment issues and conflict resolution.

If the problem is severe enough to warrant punishment, the penalty should be customized to the employee as well as to the infraction. For example, if an employee is frequently out on sick leave on Fridays, you must first tell them that the behavior is unacceptable. Secondly, you must tell them what the punishment will be if the behavior continues. Finally, you must document every behavioral issue that you deal with.

Bottom line: before you allow an employee’s bad behavior to turn them into a bad employee, you need to take the necessary steps to see if it can be corrected. So often conduct can be changed easily if you just take the time to address it squarely.”

As usual, you can reach Professor Jerry Osteryoung by e-mail at jerry.osteryoung@gmail.com or by phone at 850-644-3372.

“In the truest sense, freedom cannot be bestowed; it must be achieved.” –President Franklin D. Roosevelt

You know, despite all the trials and tribulations besetting trucking today, this is a great industry to be part of. The people working in this market – the drivers, technicians, dispatchers, safety directors, the whole shebang – are some of the most interesting you’ll ever meet, and meeting them is truly one of the best parts of my job.

Let me tell you, it’s an honor and a privilege for me to be a journalist dedicated to covering all aspects of trucking. It’s full of patriotism, loyalty, friendship, and countless other positive virtues that don’t always get reflected in what you see in the newspapers and on the TV screen. That’s why I put together the short slideshow below, to honor those character traits on display in this industry, yet rarely ever given a second thought.

(And yours truly gets a cameo appearance this time around!)

Have a great Fourth of July holiday everyone – and for those of you that’ll be on the job, putting miles on the highway this weekend, safe journeys to you.

“The climate issue and increasing fuel prices make energy use and energy efficiency some of the most important societal issues of our time.” –Leif Johansson, CEO of Swedish truck maker Volvo Group.

There is no doubt that with diesel fuel nearing a $5 per gallon average in the U.S. and roughly $10 equivalent per gallon in Europe, just about any technology designed to improve vehicle fuel efficiency is getting vetted like never before.

Topping the list is hybrid technology – the by now familiar system wherein a gasoline or diesel motor exists side-by-side with an electric motor and battery pack, working as a compete unit to improve fuel economy by operating the vehicle part of the time (usually in urban stop-and-go environments) on electricity alone. Hybrid cars and light trucks are now legion across the landscape, with hybrids making steady inroads into the medium-duty arena along with prototypes now being tested for heavy trucks.

(An early version of Volvo’s medium-duty hybrid truck, the ‘I-Sam.’)

Just this week, the U.S. Department of Energy (DOE) and the Swedish Energy Agency agreed to jointly expand financial cooperation with Volvo to fund research and development of advanced drivelines for commercial trucks, for both hybrid systems and alternative fuels.

The DOE and the Swedish Energy Agency are providing a three-year grant to the Volvo Group worth a combined $18 million for the development hybrid technology and drivelines for alternative fuels – extending a one-year research and cooperation agreement signed between the Volvo Group and the Swedish and U.S. governments back in June 2007. Volvo is chipping in $18 million of its own money into the project, pushing funding up to $36 million total.

“This cooperation is aimed at reducing the use of fossil fuels by heavy vehicles through research and development projects in the areas of energy efficiency,” said Leif Johansson, CEO of the Volvo Group, in a press statement. “The transportation industry has a special responsibility and this research and development co-operation with the U.S. Government is crucial in our efforts to develop the drivetrains and technology required by both our customers and society as a whole.”

However, there’s still a big question to be answered in all this: can hybrids provide cost-effective fuel efficiency for the long term, with no adverse environmental impact? For while the fuel savings are definitely there, the extra cost of the electric motor, driveline, and batteries coupled to the eventual disposal issue of the batteries themselves raises several thorny problems that still need to be worked out.

New York based consulting firm ABI Research took a look at this issue and found that while hybrid technology has the ability to deliver efficiency, fleet managers and operators need to evaluate in careful detail the costs and benefits of hybrids.

“The main fuel economy benefit from hybrid technology comes from the capture and reuse of kinetic energy,” says ABI Research principal analyst David Alexander. “Two central forms of storage under development and available at present are hydraulic and electrical. Both require significant investment in additional systems, so realistic evaluations and estimations must be made as regards fuel savings in order to calculate the benefits.”

As the cost of oil and related fuel products – especially diesel fuel – continues to rise, owners and drivers are looking for new technology to get more miles per gallon, period, Alexander notes. With daily media coverage over oil prices and global warming, together with the marketing messages from the largest consumer vehicle manufacturers, it is easy to assume hybrids are the solution. The facts, however, suggest something else, he warns: that the return on investment can vary dramatically depending on factors such as the type of hybrid, cost of fuel, and the typical usage cycle.

For example, full hybrid powertrain systems for commercial vehicles are not normally designed to be retrofitted to existing vehicles, though there are some that can be installed as a complete replacement for an existing engine and transmission. Conversely, depending on the technology, the cost of parts and installation can be close to purchasing a new vehicle – so this approach generally is only used to produce low numbers of vehicles for evaluation. New options becoming available include mild hybrid idle-stop systems that can be retrofitted to particular vehicles, Alexander says

“Fleet managers should beware of the hype and stick to cautious testing to ensure that fuel economy improvements occur for their typical drive cycles,” he continues. “Drivers with the most to gain will be operating on a frequent stop–start cycle, and, depending on the existing powertrain, may benefit from a mild hybrid retrofit. Otherwise, the better option may be simply to factor-in the purchase of some hybrid vehicles for specific applications as the fleet ages over time.”

(More of his thoughts are available in ABI’s Commercial Hybrid Electric Vehicle report.)

Yet fleets should also take heart that other issues related to the cost of hybrids – especially insurance – are now being addressed.

Fireman’s Fund Insurance Co. for example, recently introduced new vehicle replacement coverage for commercial fleets – insuring the full replacement cost of vehicles that are total losses for up to their first three model years – with a key additional “hybrid upgrade” endorsement as well.

The hybrid endorsement enables policyholders to upgrade to a hybrid model (or its equivalent) during the first three model-years in the event of a total loss. This is an attractive choice for those businesses that want to protect the value of their assets, reduce their energy costs, and protect the environment, says Bob Steele, product director-commercial business for Fireman’s Fund, with both of these coverage enhancements applying without a deductible.

“If a policyholder’s two-year-old pickup truck is stolen from his delivery fleet, or crushed by a fallen tree, he can replace the truck with a new one. If he chooses the hybrid option he can upgrade to a more environmentally friendly hybrid model,” Steele noted. “Many fleets are opting for hybrids and alternative fuel vehicles to reduce fuel costs and pollution. This helps them keep doing that.”

More information is available from Fireman’s Fund on their website.

So while a lot of questions still need to be answered about hybrids, the technology is gaining rapid acceptance among vehicle operators of all shapes and sizes – and may indeed prove to be a vital piece of the fuel efficiency puzzle in the long term if the cost and battery-disposal issues get worked out. We’ll see how this all plays out in the coming year.

“In today’s dynamic global business environment with enhanced technologies and vastly extended supply chains, companies are often confused by the many logistics options available to them.” –John Fitzgerald, vice president of global sales & marketing for Seko Worldwide

Competing in the transportation and logistics market today has never been tougher. That’s why it pays to try and find ways to peek into the minds of your customers — the shipper — to figure out what their needs are when it comes to handling their freight needs.

Truckers especially need all the insight they can get – both for-hire and private fleets alike – because trucking gets increasingly marginalized in the global freight world of today, viewed many times as a commodity rather than a valuable service.

(Photos courtesy of Seko Worldwide.)

Third party logistics firms are but one of many entities that’ve reshaped the freight world since trucking got deregulated back in 1980. These companies – referred to by the slick acronym ‘3PLs’ – carved out some valuable real estate in global freight markets by offering shippers a chance to transfer transportation management to their shoulders. Many big trucking companies now offer logistics divisions now as well, to make sure they can give their customers the same freight management options as the 3PLs, while preserving – if not increasing – volumes from their customer base.

John Fitzgerald, vice president of global sales & marketing for Itasca, IL-based 3PL Seko Worldwide, recently put together a neat one-page guide to help shippers figure out if outsourcing their transportation and logistics functions might be a wise move to make. Truckers should read this over, for it’ll give you an idea about some of the issues shippers are facing as they try to maintain efficient supply chains despite higher fuel prices and increased scrutiny of cross-border freight.

(John Fitzgerald’s advice for shippers provides good intel for truckers too.)

“While outsourcing of supply chain services is still increasing despite the weakened economy, the decision for a company to outsource to third party logistics providers is not an all or nothing proposition, and requires an in-depth evaluation of its entire supply chain process,” says Fitzgerald.

“Before making a decision on how to best implement a supply chain management process, companies should evaluate their own cultural alignment, core competencies and business capabilities,” he notes. “A company’s cultural alignment and cross-departmental capabilities, especially as they relate to technology, will provide the seminal factors in determining whether it should keep supply chain management services in-house, outsource them to a third party logistics provider, or employ a combination of both.”

Fitzgerald suggests six paradigms that shippers should abide by when making an outsourcing decision:

Determine the State of Your WMS System. How state-of-the art is the WMS [warehouse management service] system you have in place? If your company is consistently out-of-stock with finished products for your customers, your in-house system probably does not have the IT [information technology] capabilities to avoid poor lead times and missed shipments for your customers. You need to outsource or lose customers. If, on the other hand, your company has the wherewithal to provide the proper implementation of an enhanced and robust IT infrastructure, you may be able to realize cost-savings and efficiencies by avoiding the need to outsource your logistics functions.

Take a Good Look at Your Production Facilities. If you find that your production facilities are down for long periods of time and your logistics operations are not flexible enough to meet the requirements of after-hours deliveries and expedited service, you may have no choice but to pay the extra costs by outsourcing your logistics process on top of paying for large overhead for an inflexible logistics operation. If your in-house logistics operation is already funded as a core competency, however, you may already have a competitive edge. Flexibility is the key here.

Evaluate Your Delivery Date Success. If the targeted dates for your time-sensitive product launches are not consistently being met, it is a good indication your internal staffing and facility capacity cannot keep up with your customer demand. Your company probably requires the assistance of a 3PL. If, on the other hand, your company properly funds your logistics department and you are already an industry leader in supply chain efficiency and service, you are probably realizing economies of scale with regards to your warehouses, fleets etc., and can probably maintain these operations in-house.

Assess Your Overhead and Fixed Logistics Costs. If these expenses are squeezing your bottom line, you may realize virtually instant savings by consolidating your warehouse operations with a “shared” facility operated by a 3PL. This can enable you to move fixed costs to a variable expense, which provides flexibility in responding to market dynamics. If your company culture includes logistics as a driving force in your overall operations, you can probably adequately leverage these expenses in-house.

Examine Your Company’s IT Capabilities. If your in-house technology is unable to adapt to your growing supply chain needs, you should consider outsourcing your company’s logistics data and integrating it with that of a 3PL that specializes in customized supply chain solutions. Rather than waiting years for a new system to be developed internally, you may find that outsourcing both the technology and logistics process to a suitable 3PL will generate cost savings, while expediting the supply chain. On the flip side, if your company fully understands the entire supply chain process and how it fits with your core competencies, you may already possess the in-house ability to optimize your supply chain management procedures.

Evaluate Your Company’s Customs Compliance Readiness. With the implementation of the Customs Modernization Act, compliance assessments and audits became widely used as a tool to maximize compliance and provide uniformity. Regular assessment of import compliance processes and procedures require an evaluation of the overall effectiveness of the Customs Compliance Program, employee education and training programs, and operating procedures. If your company is unable to develop compliance and cost goals, formal policies, training programs, internal revenues and supplier compliance programs, the selection of a suitable 3PL to provide the required skill sets to establish a process-based compliance function is critical.

“Ultimately, following an in-depth evaluation of the entire supply chain process, many companies find that including a mix of in-house and outsourced logistics functions may provide the best solution for them,” says Fitzgerald. “In a global economy, where there is no set criterion for supply chain success, companies have to carefully analyze their requirements and determine what logistics processes are best suited to meeting their specific and unique global distribution needs.”

Here’s the clincher, one that truckers need to pay attention to: “Cost is always important, but ultimately the success of any global supply chain management process relates back to client satisfaction as a means of achieving customer focus and growth in market share,” says Fitzgerald.

So not only are we talking about meeting the shipper’s needs here, were talking about how meeting their needs helps the shipper meet THEIR customer’s needs – be it the grocery store shopper, clothes buyer, etc. Understand the supply chain issues and you may get a key or two for unlocking the concerns shippers have about it in the back of their minds. That in turn may give you an opening to bring new solutions to the table and thus win you more business. For in these rough and tumble economic times, finding ways to drum up and keep more business is vital to survival.

“It is clear the safety message is being heard and that the increased enforcement presence is making a difference.” –Stephen F. Campbell, executive director, Commercial Vehicle Safety Administration (CVSA)

I’ve been on a safety kick here for a while, and I’m going to stay on it for one more post, if you don’t mind.

Yes, the Dow Jones plummeted 350 points last week and, yes, oil futures are now trading north of $143 per barrel, so the challenges facing trucking are growing by the day. Yet this industry keeps improving its safety record, despite an environment conducive to people skimping on vehicle maintenance, which often directly leads to safety issues. That’s what the numbers gathered by Roadcheck 2008 tell me, anyway.

Despite concerns that a weakening economy combined with ever-increasing fuel prices would push safety to the bottom of the list for commercial motor vehicle fleets, a recent check on the industry shows the lowest rate of out-of-service vehicles in two decades, according to Stephen Campbell, executive director of the Commercial Vehicle Safety Alliance (CVSA), not-for-profit organization devoted to promote commercial motor vehicle safety and security by providing leadership to enforcement, industry and policy makers.

This year’s Roadcheck event – an annual “safety blitz” conducted across the U.S. and parts of Canada for the last 21 years – recorded a 23.9% vehicle out-of-service rate for Level I inspections. This is the principal barometer used to measure compliance and it is the lowest seen in the 21-year history of Roadcheck, noted Campbell in a pres statement.

From June 3-5, 9,148 CVSA and Federal Motor Carrier Safety Administration (FMCSA) certified inspectors at 1,683 locations across North America performed 67,931 truck and bus inspections. Some 52,345 out of the total were North American standard Level I inspections, and both the total number of inspections and Level I inspections were records for the annual Roadcheck event. Here are the results:

79.2% of all commercial vehicles passed the inspection, with 20.8% placed out of service (a decline from 21.5% placed out of service in 2007).

82.4% of vehicles carrying hazmat loads passed the inspection, and 17.6% were placed out of service (17.7% were out of service in 2007).

87.8% of passenger-carrying vehicles (buses) passed the inspection, and 12.2% were placed out of service (12.3% were out of service in 2007).

For all commercial vehicles: 94.7% of drivers passed the inspection, and 5.3% were placed out of service (6.2% were out of service in 2007).

For hazmat-carrying vehicle: 97.6% of drivers passed the inspection, and 2.4% were placed out of service (3.5% were out of service in 2007).

Passenger-carrying vehicles (buses): 95.5% of drivers passed the inspection, and 4.5% were placed out of service (3.8% were out of service in 2007).

Campbell noted that, for drivers, the 5.3% overall out-of-service rate represents a 14.5% improvement over last year’s rate – a significant jump – and that hours of service (HOS) compliance rates improved, reversing a trend from the past several years. In 2007, 66.3% of drivers placed out of service were done so for hours of service violations – that dropped to 55.6%. Just 3.8% of all drivers inspected in 2008 were placed out of service for an HOS violation, down from 4.9% last year.

Yet there remain several concerns. Brakes continue to be the dominating vehicle out of service defect, comprising 52.6% of the total vehicle defects – way too large a number, in my mind, as brakes are the single most important safety component on a commercial truck. Yet it’s worthy to note that the percentage of vehicle out of service defects that were brake related has declined noticeably over the last few years, down from a high of 56.6% in 2004.

Also on the negative side, the number of safety belt violations rose inexplicably this year, and rather dramatically too – from 829 in 2007 to 1,226 in 2008. After all the focus that’s been put on safety belt usage by commercial drivers, it baffles me that the number forgoing their use should rise – especially since it’s a costly fine.

Aside from that, though, trucking’s total safety picture continues to sharpen nicely – and all during one of the roughest economic patches this industry has faced in decades. I only wish more outside of the industry would take note of these positive developments.

“A significant problem we are noticing in recent years is the practice of manually adjusting self-adjusting brake adjusters. If you have a brake that is over-stroking and it has a self-adjusting or automatic brake adjuster, you more than likely have a problem with the brake or the adjuster. If you readjust it, you aren’t fixing the underlying problem.” –Stephen F. Campbell, executive director, Commercial Vehicle Safety Alliance (CVSA)

Despite all the advances in safety technologies discussed in my last post, when you really get down to it, there’s really but one – and some would say only one – absolutely critical safety system on today’s commercial truck: the brakes. Without properly functioning brakes, every other safety device on the vehicle – collision-warning radar, anti-rollover devices, etc. – is pretty much rendered moot. (Except for the seat belt – if your brakes fail, you better be wearing it!)

Back in May this year, the Commercial Vehicle Safety Alliance (CVSA) helped sponsor the “Operation Air Brake” campaign with local and federal-level law enforcement officials across 45 states and provinces across the U.S. and Canada during a 12-hour surprise inspection blitz. Some 11,908 vehicles were inspected, along with 93,751 brakes, and the results point to the industry’s need to refocus its attention on basic brake maintenance, I think

Here’s the tally of the Operation Air brake’s findings:

9.9% of vehicles placed out of service for brake adjustment defects

8.3% of vehicles placed out of service for brake component defects

15.8% of vehicles placed out of service for brake related defects

9.4% of brakes with manual brake adjusters placed out of service

3.8% of brakes with self-adjusting brake adjusters placed out of service

4.7% of all brakes inspected placed out of service for brake adjustment defects

“Poorly adjusted or defective air brakes reduce the braking capacity of large vehicles and further increase their stopping distance,” said Stephen Campbell, CVSA’s executive director. “Even under ideal conditions, the stopping distance of commercial vehicles can be twice as far as that of cars and other smaller vehicles. Having defective brakes increases the risk to the driver and any passenger, as well as to others traveling the roads.”

In a recent issue of the Technology and Maintenance Council’s Fleet Adviser Newsletter, Kevin Kuhn, fleet shop maintenance manager for the TravelCenters of America noted that “manually adjusting auto slack adjusters can give operators a false sense of security about the effectiveness of the brakes. Adjusted auto-slacks will likely go out of adjustment again soon after their adjustment and manually adjusting auto slacks does not fix the underlying issue with the braking system.”

Brakes are the basic foundation block for commercial vehicle safety systems of all types, so if they don’t work properly, the safety of the whole vehicle is compromised – not to mention those traveling alongside it. It just goes to show that, just as in sports, you’ve got to keep focused on the fundamentals in order to sustain a high level of successful performance.

And on another note, from the “do as I say, not as I do” file …

I just wanted to draw some attention to AB 2800, a section of Proposition 103 heading for California’s statewide ballot. A group called Consumer Watchdog is all in a lather over this piece of legislation as it would allow insurance companies to put black boxes in the cars to monitor speed, mileage, etc., and thus charge certain drivers higher premiums based on their driving habits.

“The insurance industry would pick driver’s pockets and peer into their cars with this bill, headed to the Senate Insurance committee this week,” said Carmen Balber of Consumer Watchdog. “It would allow insurance companies to require drivers to install ‘spyware’ in their cars that tracks speed, acceleration, location, time of day, mileage and other data. Under the legislation, consumers who refuse to give up their privacy would pay higher rates.”

Sponsors say the bill would encourage motorists to drive less by lowering insurance rates for lower mileage and it would also give discounts to drivers who put black box technology in their cars. “Insurers want to know where we drive, when we drive and how long it takes us to get there, but they shouldn’t get to charge more to Californians who won’t accept their spying,” said Balber. “AB 2800 just lets insurance companies charge drivers more for refusing to let them pry in their cars.”

Oh, I get it: black boxes are OK for commercial trucks, but not consumers. It’s OK to monitor the performance of commercial truck drivers, but not the average motorist – that’s “spying.” I think ALL vehicles, tractor-trailers down to cars, should have black boxes – then we all get measured to the same highway safety standards. This legislative effort will show us if the motoring public is willing to be subject to the same black boxes they want for truckers … or if it’s a case of “do as I say, not as I do” all over again.

“The driver is still the most important element in maintaining vehicle safety. However, [safety] systems can provide the additional split-second deceleration needed to maintain control of the vehicle in an emergency situation.” –Jon Morrison, president and general manager, Meritor WABCO Vehicle Control Systems.

With fuel prices out of sight and freight volumes sluggish at best, it’s easy to take a dim and grim view of the trucking industry’s prospects right now. But one thing that gets overlooked pretty consistently by the motoring public these days, much less the mainstream media, are the huge advances in commercial vehicle safety technology going on right under our collective noses.

It’s not something that’s just happened overnight, either. All the systems now in play – from Eaton’s VORAD radar system and similar offerings from Delphi, up to anti-rollover technology made by Bendix and ArvinMeritor – to new products waiting in the wings add up to a vastly improve working environment for truck drivers and the motorists surrounding them on the highway.

For example, I got the great opportunity to see ArvinMeritor’s OnGuard collision avoidance technology in action earlier this year ahead of the Technology & Maintenance Council meeting in Orlando, FL. [The slideshow below illustrates the kinds of vehicles involved, including some of the participants – especially the ubiquitous David Kolman, editor of our sister magazine Refrigerated Transport.]

Though expensive right now – list price is $4,500 – the system’s forward-looking mono-pulse radar sensor can detect multiple moving and fixed objects at distances up to 500 ft., “locking in” on relevant objects at distances of 275 to 325 ft., which is a three-second following distance at highway speed. If a moving object is detected, OnGuard automatically engages the throttle, engine retarder and service brakes when it senses a likely collision without immediate action from the driver.

Think about that – automatic braking! Just getting all the technology to work properly is a concern, of course, but this system is already on the road in some 200 trucks operated by refrigerated carrier Prime Inc.

ArvinMeritor’s competitor Bendix is hard at work on similar product, a new active cruise control (ACC) system it plans to roll out in the fourth quarter this year. The ACC system ties a truck’s brakes, engine, transmission and the company’s electronic stability program system together with radar sensors so a truck can automatically slow down and come to a full stop if it detects a slowing vehicle ahead. Bendix won’t offer ACC without its full stability control system because it is needed to prevent further control loss issues from developing in emergency braking situations, the company noted.

(Bendix’s electronic stability program or ‘ESP’ is in use on all kinds of trucks, including mixers. This one was available for test drives at MEMA’s safety summit in Washington D.C. last year.)

Yet it’s important to look outside the pure competitive nature of these companies to truly appreciate how far we’ve come in terms of boosting truck safety. All of these firms are working hand-in-glove with the Motor & Equipment Manufacturers Association (MEMA) to get the attention of Congressional lawmakers firmly fixed on the subject of enhancing commercial vehicle safety.

MEMA is holding an annual safety technology demonstration on Capitol Hill next week on June 24, which I’ll unfortunately miss since I will be on vacation. All of these systems, plus many more for the car and light truck arena, are made available for hands-on testing by congressmen and women, along with their various aides. Seeing all of this technology in action is awesome, yet it’s still an uphill battle to get any support for fiscal incentives to get truck owners to invest in it.

(Volvo has made Bendix’s ESP standard equipment on its tractors.)

“Over the next 10 years, we feel there’s going to be a growing appetite for active vehicle safety systems in the U.S.,” Joe McAleese, Bendix president & CEO, said recently. “We believe the best way to drive adoption of safety technology is through incentives, not mandates, because we believe there is substantial payback fleets can achieve from them. And once fleets see that payback, such technology will become ingrained.”

That’s one reason Bendix strongly supported the Commercial Motor Vehicle Advanced Safety Technology Act of 2007 (H.R. 3820) on Capitol Hill last year. That bill offered tax credits of up to $1,500 per system, $3,500 per vehicle and $350,000 per fleet for installing a variety of safety technologies on commercial trucks, but sadly gained no traction among lawmakers.

“Our primary focus is to deliver cost-effective solutions that make the roadways safer,” said McAleese. “H.R. 3820 was just one example of a congressional initiative that could make critical vehicle safety technologies even more accessible for today’s safety-conscious fleets. It is our hope that our participation in MEMA’s legislative summit and similar events will increase the visibility of these important issues.”

As I’ve been in the truck cabs, watching these kinds of safety systems in action first hand, I’ve no doubt they can do an awful lot to improve highway safety for everyone. The tough part is convincing Congress and other major players, like insurance companies, to support them.

I mean, at the ArvinMeritor event in Orlando, one fleet manager actually browbeat his insurance representative into attending so he could witness first hand how new safety technologies could lower the carrier’s risk profile – thus qualifying them for a break on their premiums. It still proved a hard sell, but hopefully it won’t remain so much longer.

“Painting in watercolor is like walking a tight rope; one must achieve a perfect balance between what the paint wants to do and what the artist wants to do, or all is lost.” –Mary C. Taylor

It can’t just be about the money. That’s the conclusion reached by Professor Jerry Osteryoung from the college of business at Florida State University.

Over the many years of a career teaching a wide variety of business courses, he’s come to believe that business owners cannot just focus on making money to the exclusion of everything else; that, in his mind, is a recipe for eventual disaster.

Osteryoung isn’t out on the fringe on this one, either, as any recent glance at the business community in this country can tell you. Enron? WorldCom? Countrywide? Bear Sterns? All undone by pure naked greed – an all-consuming desire to generate hefty profits at the expense of just about everything and everyone else.

Of course, as many have told me more than once (usually with a wry laugh), you can’t focus exclusively on making money in trucking because there IS no money to be made it trucking. I mean, an industry with a profit margin hovering around 5% – if you’re lucky – doesn’t attract the kind of speculators now making hash out of the petroleum markets.

Yet trucking is a vital cog in out nation’s economy, carrying 70% of all U.S. freight tonnage. Despite that critical profile, most drivers in this industry – especially on the long haul, for-hire side of the ledger – must work long hours (a 14 hour day) for an overage five figure annual pay that fluctuates depending on mileage and keeps them away from home for days if not weeks at a time. Not exactly a winning combination.

Yet most drivers and others involved in trucking don’t do it for the money – they work in this business because they love it on some level. And successful carriers – small and large – stay afloat in this business by treating drivers and the rest of their employees justly – irrespective of the money. That’s the key, Professor Osteryoung believes, for a business to sustain itself for the long haul. Here’s why, in his own words:

“When I was in classes getting my Ph.D. in finance, my professors told me over and over, ‘the purpose of a business is to make money for its owners.’ Unfortunately, I cannot tell you how many times I repeated this mantra to my students over the years. Now, however, I have a very different opinion on the subject.

A firm cannot stay in business just to make money for its owners at the exclusion of everything or everyone else. If an entrepreneur takes the attitude that he or she deserves to make all of the money, the business will suffer and will most likely crash and burn. Just consider who stands to lose the most when a business fails.

Some folks – my former professors included – would argue that the owners lose the most since they have the most at risk. There is no question in my mind that entrepreneurs lose a bunch as they generally have the most invested in terms of dollar amount. They are not; however, the ones hurt the most by a business failure. A business closing is devastating to the employees.

Employees are one of the many entities that have a vested interest in a business’ success. In addition to owners, stakeholders such as employees, vendors, banks and customers have so much tied up in a business. They are vitally concerned with the firm’s well being and will put forth much effort to ensure its success. However, success is impossible unless all of the stakeholders are taken care of.

When a business fails all of the stakeholders suffer. Take for example a financial institution. A financial institution risks much of its depositors’ funds to support a business, and if the company fails, its own financial performance suffers.

If employees are not treated reasonably, the whole business will suffer as both the quality and quantity of work declines. So many entrepreneurs forget how important each and every employee is to the success of the business, and they often fail to treat employees well. If the business should fail, these employees are the ones that are going to pay a very high cost.

My colleague and I recently assisted an entrepreneur who had been operating a business with over 50 employees for a very long time. The business was losing hundreds of thousands of dollars each month, and we tried to give the entrepreneur the resources he needed to turn things around. When the situation failed to improve, we realized that there was only one alternative left: he had to close the business and file for bankruptcy.

Telling this entrepreneur that closing the business’ doors was the best course of action was, by far, one of the hardest things I ever had to do in this job. What made it so hard was not that we had to give the entrepreneur this bad news, but because we knew what a loss it would be for all of the stakeholders, particularly the employees. Through no fault of their own, the staff would lose their jobs.

In my opinion, the purpose of a business is to serve the stakeholders. Businesses must earn money to acquire additional funds and assets, but its staff and other stakeholders are vital contributors to this endeavor. The key is to balance and deliver on the needs of all the stakeholders.”

As usual, Professor Osteryoung puts some interesting thoughts on he table for consideration. You can always reach him by e-mail at jerry.osteryoung@gmail.com or by phone at 850-644-3372.