Trucks at Work Blog

“As cities, regions and countries fight for investment spend, transport infrastructure is the ‘x-factor’ in investor’s decisions. Almost half of decision-makers said 21st century integrated transport infrastructure will make or break the economic prospects of a location.” – Professor Austin Smyth, head of the department of transport studies at Westminster University in London, England, from the recent report Smart connections: The essential role of transport for borderless business

I’m certainly preaching to the choir here when discussing the vital importance of transportation funding – not just in the U.S. but globally as well. Yet now there’s a study out that shows transportation investment is critical not just in the macro-economic scheme of things but down on the day-to-day business level, where the quality of transport infrastructure in a city or region is front of mind in four out of five business location decision-makers.

Now, a point of full disclosure: this report,Smart connections: The essential role of transport for borderless business , written by Professor Austin Smyth, head of the department of transport studies at the Westminster University in London, received its funding from the Invest Thames Gateway, the lead international inward investment agency for the Thames Gateway region in England.

[If you don’t know, the Thames is the largest river in England, and the ‘Thames Gateway’ refers to the river’s tidal basin and estuary area to the east of London.]

Obviously, they’ve got a vested interest in securing more transportation funding – and this report plays nicely into that need. However, Professor Smyth is a solid academic: formerly professor of transport economics at the Transport Research Institute at Napier University in Edinburgh, Scotland from 2003 to 2006, during which he also held an appointment as director of the National Institute for Transport and Logistics (NITL) in Dublin, Ireland, Smyth came to Westminster University to promote an integrated portfolio of research, teaching and learning activities. So I think, anyways, his findings in this study are based on solid analysis of transportation issues.

Smyth’s report found that the ability to deliver integrated transport systems – covering road, rail, air, and water ports – is what will distinguish the regional economic successes of the future, as that “integration” is critical to a city or region’s ability to provide fast, easy access to world markets, skilled workers and to bring businesses together quicker.

The study also polled a wide slice of business executives in the Greater London area and found that:

• 81% of senior business people rate transport as more important than ever for business on national, local and international levels;

• 63% said that transport was essential to attracting an increasingly mobile and demanding workforce;

• 52% of respondents cited the globalization of business as increasing the demand for efficient and integrated transport networks;

• 46% responded that virtual business is no substitute for real time face-to-face contact and that “holistic” transport systems are essential to bringing businesses together;

• Half of respondents cited committed government support to transport infrastructure as essential to their future investment decisions.

According to Smyth’s research, the essential benefits for business of being able to access integrated transport networks were cited as: access to potential customers (56%); access to labor pools (41%); ability to drive efficient operations (39%); providing a high quality of life for employees (28%).

When considering the make-up of transport networks, respondents defined the ideal investment location of the future as having the following attributes:

• Access to integrated transport networks—that combination of road, rail, ports and air (62%)

• Proximity to international markets (34%)

• Access to international airports (31%)

• Proximity to a major city (31%)

• Access to sophisticated road and rail networks (29%)

• Commitment to sustainability (17%)

I think it’s very interesting that the access to integrated transportation networks is the top concern among the business executives polled in this research, far outweighing access to any single mode (air transport) or even two modes (rail and roadways).

That shows, I think, that business is really looking at transportation from a multi-modal perspective – a perspective that doesn’t necessarily detract from trucking, mind you, especially if truckers lead the way in offering such combined modal services to businesses.

“Transport infrastructure represents the future for both business locations and business. Sophisticated and effective transport networks translate as accessibility and connectivity, making borderless business possible,” Smyth noted in his report. “In the future, access to integrated transport networks and proximity to international markets, will, undoubtedly, be among the most influential factors for investors.”

“We spend millions on research and development, scientist salaries, manufacturing, background checks, and the latest in high-tech facility security. Then what do we do? We turn it all over to a guy making $25 an hour driving a truck who probably doesn’t know what he’s hauling. It’s amazing – absolutely amazing.” –Chuck Forsaith, corporate director of supply chain security for pharmaceutical drug maker Purdue Pharma Technologies Inc.

I listened to great presentation yesterday from Chuck Forsaith (quoted above) yesterday at the 2009 National Cargo Theft Summit about why transportation – and trucking in particular – is so vulnerable to cargo theft these days and what shippers and carriers alike can do about it.

For starters, I’ve been pondering his quote at the start of this post for a while and determined that it really crystallizes a lot of things that are going wrong with trucking today – neither solely in terms of cargo theft, mind you, nor solely the fault of carriers and drivers, either.

Now, for some perspective, Forsaith – a 21 year veteran of the New Hampshire State police department – deals probably with some seriously high value freight. His company, Purdue Pharma Technologies, makes OxyContin – a powerful opiate-based pain killer that’s been in the news steadily over the years due to the illegal street sale and abuse of this narcotic. (You can read all about it on the Department of Justice’s website)

On the street, one milligram of OxyContin is worth between 50 cents to $1, with single pill containing 80 milligrams. That means the street value of just ONE OxyContin tablet is between $40 and $80 – and Purdue Pharma typically ships 50 to 100 DRUMS worth in a single tractor-trailer load. Now you know why cargo thieves stalk the pharmaceutical industry like so many hungry wolves circling a herd of fat deer.

While pharmaceuticals remain a relatively small part of the goods stolen by cargo thieves – making up just 6% of the total cargo theft “pie” as it were – the average value of a pharmaceutical cargo theft is very high, Forsaith explained; roughly $1.4 million per shipment. Overall pharmaceutical truckload shipments themselves can rnage anywhere from $10,000 per load (for over the counter or “OTC” products) to several million dollars (for the expsnive bio-tech drugs).

And that’s not the total picture, either, he stressed, for cargo thieves have exactly zero overhead – meaning the entire shipment is 100% profit to them, no matter what they sell if for. And when it comes to potentially addictive medicines such as OxyContin, the sky’s the limit.

Now here’s the thing about trucking in all of this. Forsaith talked about all the safety and security measures most pharmaceutical take to protect their products. They operate super clean, temperature controlled facilities surrounded by perimeter fencing, and closed-circuit cable television systems. Sometimes guards are used, along with barbed wire, but that’s a rarity — largely because they have a tendancy to draw unusual and undesirable attention, he explained.

On the inside, the latest in biometric technology is used to verify employee identification – employees that undergo extensive background checks and that are monitored around the clock to make sure they don’t pilfer anything.

Yet all of those measures – everything, from the guards to the biometric scanners and TV cameras – disappear when such medicinal products are loaded for shipment from the plant to a distribution center, and then over that “last mile” from the D.C. to the local pharmacy.

For starters, most shippers – and that includeds pharamceutical firms — map out their logistics scheme on a “just in time” basis. And as a result many commodities — not just medicines — get shipped over the weekend, being sent out on a Friday afternoon so they are outside the doors on distribution centers Monday morning. But guess what? That means a shipment – no matter how valuable – is going to sit somewhere, parked in a truckstop or alongside a highway on/off ramp, completely exposed. Why? Because most DCs – like most of the manufacturing world – are shut down on weekends; there’s no one to accept delivery.

“After looking at the pharma supply chain more closely, our group identified that as an issue and have taken recent steps to modify those practices,” said Forsaith. “Shipping over weekends is really an issue that affects those selling all commodities – not just pharmaceutical ones.”

Think about this, too, he stressed: if a trucker gets in trouble along the way on a weekend haul – if his or her vehicle breaks down or is stolen – who do they call? Trying to get roadside assistance on a weekend, as all truckers know, can be something of a nightmare. If their load is stolen on top of that, who do they call? Other than their dispatcher – usually at home, maybe with a pager or cell phone or maybe not – do they have the numbers of local police or even cargo task forces? Most likely, they don’t.

On top of this, pharmaceutical firms – like many companies these days – still seem to treat trucking like a commodity, as if trucks and truckers are a dime a dozen. Forsaith recalled talking to one of his peers about how they transported drugs and found their loads we’re being subcontracted out – that the shipper didn’t even know WHO was hauling their products; all for the sake of wringing a few dollars more out of the freight bill.

[You can view some of Forsaith’s presentation in the second half of the video below.]

Carriers, however, don’t get off scot free either to Forsaith’s mind. Many times the lawyers at a pharmaceutical company and carrier hammer out a long, detailed contract regarding transport security policies. Yet nothing is communicated to the driver – not the importance of the load, the requirement not to stop during the first 200 to 300 miles of the run (the prime target time for cargo thieves), nothing. All the legal mumbo jumbo in the world won’t protect a load if the driver doesn’t know the load needs protecting in the first place.

In the end, however, it all comes back to a very simple mantra: you get what you pay for. Forsaith talked in detail about the kinds of carriers he hires – going so far as to hire armored tractors staffed with two drivers carrying firearms. “That right there stops cargo thieves in their tracks,” he explained. “They don’t want confrontation, because they don’t need it. They’ll just move on to another load.”

Reading between the lines, you can tell Forsaith doesn’t skimp when it comes to transportation his company’s goods (you think an armored tractor-trailer and pistol-toting drivers come cheap?) He makes sure his carriers run well-maintained equipment, that offer tracking/tracing capability, that are willing to go the extra mile to secure a load start to finish – and I am sure he pays very well for that service.

That’s what I think it’s going to boil down to when it comes to helping the trucking industry defeat cargo thieves – making sure they are profitable enough to afford the necessary investments. You simply can’t expect companies barely surviving on 3% and 4% profit margins to invest in new equipment, maintenance, driver training, etc., when the rates they get barely afford them money to buy fuel.

Now, if carriers are paid well yet still fail to provide proper security, that’s one thing – expecting the gold standard of protection while bidding freight rates down to rock bottom basement pricing is something else entirely. That’s one of the lessons that’s got to be absorbed as the battle against cargo theft goes forward.

“The continued rise of the freight transportation service index is evidence that America is moving towards economic recovery.” –Transportation Secretary Ray LaHood

So, after spending much of the week ruminating about energy, greenhouse gases, and the latest technological wonder project (preventing vehicle accidents from space, via satellite? I’m still a doubter on that one, I’m afraid), we circle back to the main ongoing issue in trucking today: the still-sickly freight market.

The question we’re all asking is, “When are things going to get better?” Well, the statistics, at least, are showing that things are getting better — albeit at the pace of a garden slug. Not exactly a recipe for happiness and joy in anyone’s ledger, but maybe – just maybe – it’s a portent of better days ahead. And anything has got to be better than the anemic freight flows we’re experiencing now.

The latest bit of hopeful news comes from the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS), which reported this week that its Freight Transportation Services Index (TSI) rose 0.7% in August from its July level – the index’s second consecutive monthly increase.

[You can see why this isn’t exactly a “toss-the-hats-in-the-air” moment, for a paltry 0.7% rightly doesn’t elicit much cheering.]

BTS also reported that the Freight TSI has now gone four consecutive months without a decline after dropping in nine of the previous 12 months, and is the first four-month period without a decline in the index since 2002.

Just so we’re all on the same page: the Freight TSI measures the month-to-month changes in freight shipments in ton-miles, which are then combined into one index. The index measures the output of the for-hire freight transportation industry and consists of data from for-hire trucking, rail, inland waterways, pipelines and air freight.

[As you can see, this is an EXTREMELY broad measure of freight – almost too extreme, with the inclusion of pipeline data.]

The August Freight TSI reading of 96.2 is a 2.7% from the recent low of 93.6 reached in April – and April the index was at its lowest level since June 1997.

The index is also down 14.8% from its historic peak of 112.9 reached in May 2006, BTS said, with the 4.2% decline in the first eight months of 2009 the largest in the last decade, exceeding the 4% decline for the first eight months of 2000.

The freight index is also down 12.2% in the five years from August 2004 and down 6.5% in the 10 years from August 1999 – with all the five-year and 10-year declines took place consecutively in the past several months. Again, data points that don’t exactly lift the clouds of doom and gloom hovering over the heads of freight haulers today.

“There is still a long road ahead [so] we will not let this positive sign lull us into complacency,” noted Transportation Secretary Ray LaHood when the BTS released its freight index reading yesterday.

Complacency, though, isn’t the problem – survival is. And incremental improvements in freight flows, though welcome indeed, don’t amount to a full-fledged revival of the fortunes of trucking companies living of the fiscal edge of ruin, either.

“The past 12 months have posed unprecedented challenges for logistics providers around the world … But in that time we have all learned a great deal and made business adjustments that undoubtedly positioned the industry for steady growth and continued success as the economy rebounds.” –Vince Hartnett, president, Penske Logistics

So, yes, OK, I am writing today about yet ANOTHER survey, this one taking the pulse of the global logistics industry (one would think I should be working for the Gallup organization, clipboard in hand and conducting door-to-door polling, the way I carry on about these surveys!)

Whatever you think of survey methodology and whether it accurately reflects what’s occurring in the transportation and logistics markets right now, these reports t the very least open a window of sorts into what the top executives of the companies being polled are thinking. Are they pessimistic? Or optimistic? And, most importantly, what changes do they believe are occurring right now that could alter the business environment for their respective companies in the months ahead?

One of the more interesting trends that surfaced in the 16th annual 3PL Provider CEO Perspective survey is that supply chains are shortening or being relocated altogether – a continued trend towards what’s been called “reverse globalization” that shifts manufacturing activities away from Asia and back to North or Central America or Europe.

[Read that as: traditional factory jobs coming BACK to the U.S. as the complexities and costs of moving raw materials and finished goods throughout a globe-spanning manufacturing footprint become too much in some cases to bear.]

“Many customers of the 3PLs involved in this survey took steps during the past year to shorten their supply chains,” noted survey author Professor Robert Lieb of supply chain management studies at Northeastern University, who conducted his reserach with Penske Logistics’ sponsorship. “The CEOs surveyed in North America and Europe reported that, on average, nearly one-quarter of their clients had taken such steps during the past year. For the APAC [Asia-Pacific] region, the reported average was 9%.”

Lieb noted that 20 of the 35 CEOs that responded to this survey reported that some of their major clients had shifted some of their manufacturing activities from Asia to North or Central America or Eastern Europe. “The scale of that shift is small at this point, but many of the CEOs expect the trend to grow over the next several years as many companies seek to shorten supply chains,” he explained.

Joe Gallick, senior vice president of sales for Penske Logistics, pointed out that during 2009, three separate surveys were conducted to generate this single report: one of the CEOs of large companies serving the North American third party logistics or “3PL” marketplace; another of those serving the European market; and a third of companies serving the Asia-Pacific3PL marketplace.

The 35 companies participating in this survey are big and well-known – including luminaries such as Cardinal Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Landstar, Menlo Logistics, Penske Logistics, Ryder Integrated Logistics, Schneider Logistics, Transplace, UPS Supply Chain Solutions, Caterpillar Logistics Services, and CEVA Logistics, among others. Collectively, they generated in excess of $64 billion in 3PL revenues in those three global markets during 2008 – not too shabby by any stretch of the imagination.

However, this year, 16 of the 35 companies surveyed failed to meet their revenue growth projections during 2008 – nine in North America, six in Europe, one in APAC – though 33 reported they were at least at least moderately profitable during 2008, with only one unprofitable. Not surprisingly, though, the global recession is affecting their revenue growth outlook pretty significantly, with one-year company revenue growth projections at 6.9% in North America for this year (12.6% in 2008), negative 3.3% for Europe (10.8% in 2008) and 12.9% for APAC (21.4% in 2008).

For the industry as a whole, the CEOS are in less sanguine about the outlook, projecting one-year industry revenue growth to average 3.5% for North America (9.0% in 2008), negative 1.4% for Europe (7.3% in 2008) and 10.7% for Asia-Pacific (11.2% in 2008).

Not surprisingly, 33 out of the 35 CEOs indicated that the economic downturn had intensified price compression issues within the industry (what a shocker this factoid is – not!), yet they also recognized battling over pricing had been a long-standing problem within the industry before the global recession began.

More seriously, the impact of the global recession on business relationships in the three regions is none too positive, with CEOs in all three regions reporting about one-quarter of such relationships with clients becoming more adversarial as a result of these tight economic times.

However, in some cases that was at least partially offset by the emergence of more collaborative relationships with other customers. Interestingly, more shippers in the North American region seem to be talking the collaborative approach, with 3PL CEOs reporting such relationships with more than one-third of their customers. European 3PL CEOs, by contrast, reported the same development with approximately 20% of their customers, while and APAC CEOs reported more collaborative relationships with approximately 13% of their clients.

What are the big problems ahead, according to 3PL CEOs? For those in North America, they include dealing with the ongoing economic recession and its related impact on volume, price compression, and the loss of talent tied to layoffs and hiring freezes. European CEOs focused on problems related to volume fluctuations, price compression and the financial instability of some important customers. The problems identified by the CEOs in the APAC survey included an ongoing lack of management talent in the region, the region’s “weak” infrastructure, cost pressures, and problems with government bureaucracy and corruption.

Distilling all of this information down, Northeastern’s Lieb formed a 10-point “outlook” of major trends and issues that’ll affect the global market going forward:

1. Slow recovery of 3PL business, particularly in Europe

2. In many cases adversarial clients are likely to become ex-clients

3. Stronger relationships to emerge with many key 3PL customers

4. More emphasis on “quality” customers and solid verticals

5. Less aggressive posture on mergers and acquisitions

6. Slower pace of geographic expansion

7. More emphasis placed by large 3PLs on alliances with other 3PLs, carriers and middlemen

8. Failures among small/medium size 3PLs in all regions

9. Chronic management shortage lessened due to provider and user layoffs

10. Sustainability issues to receive greater attention, particularly in the APAC region

Yet despite those many negatives, Lieb reported that there’s a lot of positive thought flowing out there in the logistics community – especially as it relates to forming more collaborative (and thus hopefully more fiscally-equal) partnerships – and that could bode well for domestic truckers.

“Despite bearish growth projections and acknowledgement that consolidation, pricing pressures and operational reductions were, and may continue to be, necessary adjustments, the opportunities for improved collaboration with customers, expansion into emerging markets and the possible addition of new management talent have many excited about the next several years,” Lieb said.

“The global economic downturn has impacted every aspect of business operations, and [the] supply chain is no exception. During the past year companies have turned to their supply chains to cut costs and grow revenues. To a large degree, the supply chain has delivered, helping companies get through some tough times.” –Chuck Poirier, partner, CSC’s global business solutions and services group

It should come as no surprise to anyone in trucking – much less the world of logistics at large – that companies are starting to view their supply chains less as “necessary evils” and more as cost-control and revenue-generating tools. Consistent, dependable, efficient, reliable – use whatever descriptive you like; if the supply chain does it, a business thrives. It’s just a wonder it’s taken so long for so many in the business world to realize this (which has allowed Wal Mart to keep eating everyone’s lunch).

These are but some of the findings from the 2009 Global Survey of Supply Chain Progress – compiled by logistics firm CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals (CSCMP) and Michigan State University (MSU). Economic pressures are forcing companies to employ their supply chains primarily the sourcing and procurement functions, to contain costs and boost revenue, the study found – and demand for those two results will only increase in the future, noted Chuck Poirier, a partner with CSC’s global business solutions and services group.

“We see this trend as evidence of the fact that supply chain is finally becoming entrenched as a company-wide improvement effort,” he said. “Leaders are implementing strategic supply chain efforts to transform business processes to achieve near-optimum operating conditions. At the same time, most firms identified as followers and laggards have not reached the limit of what can be done to enhance financial performance with their supply chains.”

Poirier said this survey, completed by supply chain executives representing more than 20 industries and every major geographical segment of the world, shows the extent to which the economy has impacted the supply management function. Respondents cited an immediate need to cut costs as the top economic pressure on their supply chain, with an overwhelming 88% of respondents have set objectives for purchasing to generate cost savings in the next 12 months.

The study also found 33% of respondents indicate they leveraged supply chain initiatives to reduce costs between 1% and 5% in the last three years, with 27% realizing even higher cost reductions, ranging from6% to 10%. “However, the most significant improvement over 2008 was in the number of respondents who reported no impact – or did not know the impact – of supply chain initiatives on costs,” Poirier said. “That number dropped significantly, from 22% in 2008 to 13% in this year’s survey.”

What does this mean for truckers? Well, a combination of things for starters. I think on the one hand it indicates a lot of shippers are again going to look at squeezing freight rates down as far as they can go. Yet I also think the data indicates the more enlightened firms are probably going to stop focusing solely on the price tag for logistics services and start looking longer term at things like value, consistency, and cargo integrity.

Here’s why I think this: Poirier explained that while a majority of respondents indicate they are already using their supply chain to trim logistics costs, source more strategically and generate additional savings by leveraging the purchasing function, others went step further – accelerating revenue generation by integrating the supply chain organization with key internal groups such as finance, IT and product development.

“The leaders, in short, understand the central role supply chain management can play in the company’s business success and are playing that role to the fullest,” he said.

Poirier also pointed out that while North American firms are more likely to have a supply chain management or “SCM” organization, the ones developed by European firms are more mature, with CEOs more likely to be involved in running them (over 50% compared to 30% in North America).

“It’s an old story, but most firms are simply too slow to recognize the values that can be added from a consistent focus on supply chain under the direction of professional and involved management,” he noted. “That’s a lesson the leaders wrapped up years ago.”

But it seems to be a lesson more businesses are taking to heart now – lessons that hopefully will offer opportunities for truckers in the months and years ahead to become more respected parts of global supply chains.

“America’s freight transportation system is in dire need of increased and sustained investment. Without a strong commitment from Congress in the upcoming reauthorization cycle, productivity of all modes could deteriorate, which in turn will impact our country’s economic recovery and international competitiveness.” –Joni Casey, president and CEO, Intermodal Association of North America.

I attended an interesting press conference yesterday; interesting, from my perspective, as it gathered many erstwhile competitors in the world of freight transport, such as truckers and railroads for starters, and put them together at the same table united behind a single goal; retooling America’s freight policy for the future.

The main worry of the Freight Stakeholders Coalition – a joint group made up of 17 different organizations representing truckers, railroads, ports, shippers, supply chain experts, even state department of transportation agencies – is that freight occupies the lower rungs of the ladder when it comes to Congressional and Presidential interest.

For a good example of this indifference, look no farther than the efforts to delay a vote on the Surface Transportation Authorization Act of 2009, commonly referred to as the “highway bill,” for nearly two years. The Senate’s Environment and Public Works (EPW) committee approved by 18-1 an 18-month extension of federal highway programs from October of this year through March 2011; a policy President Obama’s administration strongly supports.

Yet such an extreme delay is drawing fire from all corners many fear such temporizing may only worsen transportation infrastructure issues. And it is such temporizing over transportation and freight issues, said Janet Kavinoky, director of transportation infrastructure for the U.S. Chamber of Commerce, must change and change fast.

“Freight is an issue that should be at the top of the nation’s priority list – but it is not,” she stressed during her turn at the podium. “No matter the differences among industries as to what needs the most funding, we all recognize 18 months is too long to wait to pass a reauthorization bill. What do we need more time for? There’s enough information out there about what we need to do to fill this room 10 times over.”

She pointed out that not one but two bipartisan Congressional commissions put together a rough outline of the funding and policy steps needed to be taken to establish an effective freight strategy for the U.S. – and if the right policy directions are taken, some tax increases and extra user fees could find broad support among business and transportation groups, Kavinoky said.

“We need a sustainable [transportation] infrastructure program, building better connections between all of our transportation modes, or the productivity of our nation is eventually going to suffer – thwarted by bottlenecks and congestion,” she explained.

The Freight Stakeholders Coalition backs a detailed 10-point plan they released back in May to help make this strategic freight vision become a reality in the U.S. – though it is not for the faint of heart:

1. Mandate the development of a National Multimodal Freight Strategic Plan. The surface transportation authorization bill should mandate the development of a National Multimodal Freight Strategic Plan. The development of this plan should be led by the U.S. Department of Transportation, in partnership with state DOTs, cities, counties, MPOS and regional planning organizations, ports, freight shippers, freight carriers, and other stakeholders.

2. Provide dedicated funds for freight mobility/goods movement. The legislation should provide dedicated funds for freight mobility/goods movement. Dedicated funds should be provided to support capital investment in critical freight transportation infrastructure to produce major public benefits including higher productivity, enhanced global competitiveness and a higher standard of living for our nation. High priority should be given to investment in efficient goods movement on the most significant freight corridors, including investment in intermodal connectors into freight terminals and projects that support national and regional connectivity.

3. Authorize a state-administered freight transportation program. Congress should authorize a state-administered freight transportation program as a new core element of the federal highway program apportioned to states.

4. If a new freight trust fund is created, it should be firewalled, with the funds fully spent on projects that facilitate freight transportation and not used for any other purpose. Priority should be given to nationally and regionally significant infrastructure, with funds distributed through a competitive grant process using objective, merit-based criteria. Appropriate projects that are freight-related should still be eligible to compete for other federal funding sources.

5. Establish a multi-modal freight office within the Office of the DOT Secretary. Freight mobility should be a key priority within DOT. The Secretary’s office should have staff with freight expertise that can focus on nationally and regionally significant infrastructure.

6. Form a national freight industry advisory group pursuant to the Federal Advisory Committee Act to provide industry input to DOT, working in conjunction with the new multi-modal freight office. The advisory group should be funded and staffed, and it should consist of freight transportation providers from all modes as well as shippers and state and local planning organizations. Despite the best efforts of the agency to function as “One DOT,” there is still not enough of a focused voice for freight. An “advisory group” would meet the need for regular and professional interaction between DOT and the diverse freight industry, and could help identify critical freight chokepoints in the national freight transportation system.

7. Fund multi-state freight corridor planning organizations. Given that goods often move across state lines and involve multiple modes of transportation, Congress should fund multi-state, multi-modal planning organizations that will make it possible to plan and invest in projects where costs are concentrated in a single state but benefits are distributed among multiple states.

8. Build on the success of existing freight programs. There are numerous existing transportation programs that facilitate freight mobility and are demonstrably valuable. A new national freight policy should continue and strengthen these core programs or build on their principles and successes to guide freight program development if DOT is restructured and/or program areas are consolidated. Funding for discretionary programs should be awarded through a competitive grant process.

9. Expand freight planning expertise at the state and local levels. Given the importance of freight mobility to the national economy, States and MPOs should be provided additional funds for expert staff positions dedicated to freight issues (commensurate to the volumes of freight moving in and through their areas). All states should have a freight plan as a tool for planning investments and for linking to the national freight system.

10. Foster operational and environmental efficiencies in goods movement. As in other aspects of transportation, improvements designed to achieve long term sustainability in goods movement are desirable to meet both commercial objectives (economy and efficiency) and public objectives (energy security and reduced environmental impact). Federal policy should employ positive approaches to enhance freight system efficiency and throughput with the goal of reducing energy consumption and green house gas emissions.

Allen D. Biehler, P.E., secretary of the Pennsylvania Department of Transportation and the current president of the American Association of State Highway and Transportation Officials, illustrated how freight policy, infrastructure needs, and environmental concerns all intersect. Once, after a long flight night, he arrived late at Newark NJ, missing his connecting flight to Harrisburg PA. Rather than wait until the next day, Biehler said he rented a car and started driving back to Harrisburg.

“So I am leaving the airport around 10 p.m. at night and I pass this long line of trucks out on the turnpike – at least a seven mile backup of commercial vehicles waiting to get into Newark to pick up or drop off loads,” he related. “Think about that – seven miles worth of vehicles, all idling their engines, going nowhere. Think of the fuel wasted, the emissions created – all because we lack the necessary transportation infrastructure. That clearly illustrates, I think, the environmental impact of poor freight policy and why we need to correct it.”

“Businesses large and small … understand how critical it is to maintain, modernize and expand the nation’s freight transportation system,” added the Chmaber’s Kavinoky. “Economic recovery and long-term growth are supported by reliable and safe networks that are operated efficiently. That’s why we must make moving the commerce a central focus of any transportation-related legislation.”

The question is, though, are Congress and the President willing to listen?

“Cargo theft should be a major worry for truckers because it is most often perpetrated by organized crime since it is low risk, high reward form of theft. We know that distribution over the Internet makes it possible to sell most any product, virtually undetected. So, no one is safe from cargo theft.” –Robert Furtado, CEO, LoJack Supply Chain Integrity.

Cargo theft is one of the 900 pound elephants sitting not-so-silently in trucking’s corner of the world – an elephant many carriers (and shippers for that matter) try to ignore as best as they possibly can. That’s not to suggest they try to deny the existence of cargo theft altogether; it’s just that the collateral damage from cargo theft, such as higher insurance premiums and loss of reputation, is almost as bad if not worse than the financial hit from the theft itself.

As a result, the size and scope of the cargo theft problem in trucking – and across global supply chains, for that matter – is hazy at best. Three years ago, the Federal Bureau of Investigation (FBI) hazarded a guess, stating that cargo theft cost the U.S. $15 billion to $30 billion annually – yet in the same breath cautioned that the true measure of those losses may be even higher, since many businesses are reluctant to report thefts out of concern for their reputations or insurance premiums.

Now comes word from a recent study of cargo theft trends – at least from those companies willing to report them – that cargo thieves are getting more organized. According to LoJack Supply Chain Integrity in its second quarter “cargo theft bulletin” this year, an increasing number of thefts (34 incidents) occurred at carrier facilities, including secured drop yards – an increase of more than 300% percent compared to the first quarter of 2009.

“The fact that thieves are stealing goods increasingly from secured areas is further proof that ‘cargo at rest is cargo at risk,’ even if the cargo is located in an area with some measures of physical security,” said Robert Furtado, CEO of LoJack SCI.

The company’s second quarter bulletin – based on a total of 221 incidents reported to date from the 650 members of LoJack SCI’s Supply Chain-Information Sharing and Analysis Center (SC-ISAC) – also revealed that vehicles and their cargoes are at rest for a shorter period of time before they are stolen. For example, in the second quarter this year, LoJack SCI identified 19 incidents that occurred in less than four hours time – eight of which had been parked for less than one hour.

“This theft trend tells us that these loads were under surveillance and had been targeted from their point of origin, implying that these criminal acts were the results of very specific planning at the hands of organized thieves,” Furtado added.

Does this mean trucking – and the freight community as a whole – is starting to lose ground in the battle against cargo thieves? Actually, no; and in fact, the heat is getting tuned up on cargo thieves significantly, in part due to more attention from law enforcement and the willingness of the trucking industry to not only share data but become active participants in the cargo theft conflict.

For starters, the FBI is gearing up to track cargo theft as a specific type of crime – following the passage in 2005 of a law by Congress that mandates the development and addition of a cargo theft category to the FBI’s Uniform Crime Reporting (UCR) system. Though this category will not be fully operational for a year or two, the quantitative numbers gleaned from UCR reporting – identifying cargo thefts by product category, location, and estimated loss – should help fill in the “big picture” details we’ve been lacking for many years.

This is going to substantially help ongoing efforts to battle cargo crime – a battle that’s going on for a long time now. For example, the Los Angeles county Sherriff’s department created Cargo Criminal Apprehension Team – known by the moniker “Cargo CATs” – back in 1990. But in recent years, the freight industry – both carriers and shippers alike – have been providing crucial “fire support” for law enforcement’s efforts, and that’s getting results.

I talked recently to Walt Fountain, director of enterprise security at TL carrier Schneider National, about this hand-in-glove effort by the truckers and badges to jointly knock the wind out of cargo thieves and he related some good stories revealing how such partnerships work.

About nine months ago, one of Schneider’s drivers pulled into a California truckstop for a quick break. Locking his truck, he went in for a cup of coffee … and came out to find his entire rig missing, He quickly phone Schneider’s 24/7 security center to report his rig stolen – providing his location, license number and other pertinent information about his vehicle. They in turn called the California Highway Patrol’s (CHP) Cargo Theft Interdiction Program or CTIP and within minutes, CHP patrol officers and related personnel were alerted to the theft.

This information proved vital as it allowed a highway camera operator to spot the Schneider truck in question some four hours after the crime occurred (the day-glo orange color of Schneider’s trucks also proving very helpful here, noted Fountain). CHP closed in on the truck … but waited, allowing the vehicle to reach its final destination – a warehouse stocked with stolen goods and staffed by a slew of expert cargo thieves. The CHP pounced and bagged the whole lot – all due to truck driver’s fast dialing and the transfer of vital information quickly to law enforcement.

This partnership also works in reverse, too, noted Fountain (seen here at right). In another case, a CHP officer on patrol noticed a Schneider truck in his area parked at a warehouse – but he’d never before seen a Schneider truck stay in his area. His sixth sense tripped, the officer phoned it in – could someone find out if it is supposed to be here? Schneider’s security center again got the call and – as it’s plugged directly into the company’s operation center – quickly determined that truck shouldn’t be in that location. Boom! Another cargo theft bust goes down.

“It all comes down to the rapid exchange of information between us and law enforcement; and also among our personnel internally,” Fountain told me. “It’s also about maintaining security discipline on our side – making sure our drivers and other personnel constantly follow the correct procedure to secure cargo in our care. It also means keeping our drivers in the loop, too; it’s up to us to tell them where the ‘hot spots’ are in term of cargo thefts.”

The FBI is also promoting closer ties between the law enforcement community and freight industry in order to make cargo crime a far more difficult enterprise to engage in. I sent some questions to the FBI about what things the trucking community could do to help the agency battle cargo theft and got some suggestions from Ron Koziol, assistant section chief-violent crime section of the FBI’s criminal investigative division:

Timely reporting: “The [trucking] industry should work to ensure that the cargo thefts are reported to the law enforcement as soon as possible,” said Koziol. That means in minutes or hours, not days.

Details and points of contact: “Information such as a complete description of the tractor/trailer, the license plate and vehicle identification numbers (VINs) and a complete description of the lost cargo contents are important,” he added. “Regarding cargo contents, many times identifying numbers, such as bar codes and inventory control numbers are available or even specific identifying characteristics unique to a product or a package would be helpful. Also, a point of contact with the company’s security or loss prevention personnel is important.”

Training personnel: Training regarding different types of thefts, practical and sound investigative techniques, and the methods of operation utilized by the theft groups should be regularly conducted. “A review of security procedures and operations within the whole supply chain is something that many companies now perform regularly to evaluate the risks,” Koziol noted.

Background investigations: These are critical, both for current and future employees within the supply chain, especially where risk of losses is heightened or where the value of the cargo is substantial is a recommended normal operating procedure, he said.

Work together: “Industry and law enforcement must maintain effective communication and liaison,” Koziol stressed. “Even though property crimes may be considered a low priority for law enforcement and prosecutors, it is recognized that the criminal groups involved in these crimes have a great effect on the economic losses to the victim companies and joint efforts amongst the participants is key to our successes.”

Keep learning and sharing: Finally, the trucking industry should continue to promote and support participation in national organizations and regional organizations, working groups, and training sessions which brings together industry partners and law enforcement to understand crime issues, trends and new concepts.

“Through liaison contacts and working groups with the private sector, trends and intelligence are shared to better coordinate activities and understand the crime problem,” noted Koziol. “These steps will help law enforcement and industry in better understanding the crime problem, the trends, and the methods of operation.”

“Inefficiency [is a] slow-moving pandemic that cripples financial position, operational flexibility and innovation over time.” –Shelton Moynahan

Nearly five years ago, Jeffrey Shane, then under secretary for policy at the U.S. Department of Transportation, gave an interesting speech at the 15th Annual Breakbulk Conference & Exhibition in New Orleans concerning the vital importance of improving freight efficiency in the U.S. in order to beef up our nation’s economic competitiveness in global markets.

Sure, you might say; here’s a topic we’ve covered before ad infinitem and ad nausem. What’s interesting, though, are the parallels between the issues Shane, then-Transportation Secretary Norm Mineta, and the DOT faced at that time and those facing Secretary Ray LaHood and the DOT now.

One of the taxing issues Shane addressed five years ago dealt with how the reauthorization of surface transportation programs dovetailed with efforts to enhance the efficiency of freight movements in the U.S.

“Earlier this month we marked the first anniversary of the expiration of the Transportation Equity Act for the 21st Century – TEA-21 – which provides funding and authorization for the whole array of federal highway, highway safety and transit programs, but this anniversary is no cause for celebration,” Shane said in his October 2004 speech. “Because Congress was not able to pass a six year bill, DOT now has to work within the constraints of an eight-month extension of old programs It is highly regrettable that Congress hasn’t finished its work on that legislation [because] there are important innovations … that we want to see passed, and we will continue to urge Congress to adopt those changes in a six-year bill.”

That complaint sounds very familiar as we head towards an almost eerily similar extension effort of current surface transportation needs – this one with a longer, 18-month delay envisioned – putting off debate on U.S. House Transportation Chairman James Oberstar’s (D-Minn.) ambitious effort to hammer out a $450 billion, six-year surface transportation authorization act by Sept. 30.

Five years ago, DOT’s Shane felt such delays in surface transportation legislation would hold up efforts to make freight transport more efficient in the U.S. “For example, we would focus more resources on the intermodal connections between our roads, ports, railways, and airports,” he said back then. “We have also proposed a number of new financing tools to better support infrastructure investments, including making highway and freight transfer facilities eligible for private activity bond financing for the first time, and broadening TEA-21’s successful ‘TIFIA’ innovative financing program.”

Interestingly, DOT also proposed five years ago to require each state to appoint a “Freight Coordinator” to help ensure that freight projects receive the proper measure of attention in local and regional planning processes. “Realizing the considerable benefits of … these proposals can only come with final congressional action, however,” Shane stressed. “It is important, therefore, that Congress pass a six-year surface transportation reauthorization as soon as possible.”

The thrust of Shane’s comments, though, addressed the need for not only more efficient but much more highly integrated freight networks in order to handle a higher flow of commerce into and out of the U.S. As we sit now, mired in a global economic recession, these words may seem out of touch with reality … but I don’t think so. In fact, the downturn may give us, as a nation, a chance to improve our freight infrastructure “competitiveness” so we can hit the ground running when better times return.

“The global economy in which we now find ourselves profoundly impacts each and every one of us, often in ways that we do not even realize,” Shane explained five years ago. “This ineluctable transition to a globally driven economy presents special challenges, particularly when it comes to having the port, highway and rail capacity necessary to keep these goods moving. While … trade … brings enormous economic benefits to consumers and economies both here and abroad, it forces us – especially those of us at DOT – to remain focused on the need for transportation infrastructure sufficient to handle the increased flow of commerce that.”

Perhaps most importantly from the DOT’s perspective, he said, the U.S. economy relies increasingly on seamless connections between all modes of transportation, with port facilities and the highway and rail networks that serve them critical elements in that system. “Unfortunately, in many cases they are being stretched to their limits as they deal with steadily mounting cargo volumes, larger ships, and increased land side congestion,” Shane noted. “Those of us in government with responsibility for national transportation policy have to be cognizant of [this} as increasing capacity or improving operational flows in one mode won’t help much if we don’t address bottlenecks in another.”

Does all this sound familiar? It should, because we’re dealing the exact same problems when it comes to smoothing out freight flows as we did five years ago, even 10 years ago. And it’s a problem that’s not going away.

“Just to give you a sense for what I’m talking about, let me highlight a couple of statistics,” said Shane. He noted that in 1970, overseas trade accounted for only 13% of U.S. gross domestic product (GDP) and that by 2004, the year he gave his speech, it accounted for nearly 30%. Five years ago, the U.S. transportation system carried more than 15 billion tons of freight annually, valued at over nine trillion dollars, with even the most conservative forecasts suggesting that overall freight volumes would grow by another 60% by 2020.

Of course, the global recession we’re going through now has more than likely knocked that tonnage forecast down a ways. But one thing is for certain – despite the near-term falloff in freight, volumes will grow again – and, again, we’re going to be stuck trying to manage them with an at-times disconnected network of modes, rather than a more unified freight transport system.

“That is why it is not too much to say that America’s place in the global economy of the future will be determined in large part by the efficiency of our transportation system,” Shane stressed. “So we must determined to do all we can to enhance that efficiency.”

We’ll see if we can indeed do that, despite the fiscal and economic challenges that lay ahead.

“Logistics is a key enabler of industry. It is an essential service, not unlike basic infrastructure. Without it, the economy and world trade comes to a halt.” –Choi Shing Kwok, Singapore’s permanent secretary-ministry of transport

I noted in a post earlier this week a big meeting here in Washington D.C. under the joint auspices of the U.S. Department of Commerce and of Transportation about the critical role supply chain management plays in making America competitive in the world’s markets.

Now, this is neither a new idea nor one uniquely American, for supply chain management and the logistics networks it controls are of major interest in all four corners of globe.

Choi Shing Kwok, Singapore’s permanent secretary-ministry of transport, illustrated the global importance of logistics in the keynote speech late last month during the very first International Symposium on Maritime Logistics and Supply Chain Systems.

“The traditional view of logistics gave it a backroom and functional role not fully deserving of senior management attention. This perspective has changed,” he said. “Today, logistics has become a knowledge service to drive both the top and bottom lines. Logistics is now a key source of competitive advantage for both companies and countries.”

This view, I think, is critical for truckers in the U.S. to absorb because they play a very key role in providing several of the critical links within global supply chain networks – and, in some cases, managing the parts if not all of the connected chain as well if they have divisions devoted to providing logistics services, as carriers such as Schneider National do.

Yet logistics is not a stale, one-note field of endeavour anymore – something Choi Shing Kwok stressed in his remarks. “Logistics is a dynamic field and old logistics methods and processes that had worked well in the past will not continue to work in the future,” he said. “Containerisation, the advent of air express services, the rise of 3PL [third party logistics] services – each transformed the world of logistics and brought new innovative companies to the fore while leaving those unable to adapt behind.”

Furthermore, demands on the supply chain have become more sophisticated, he stressed. “Supply chain performance is no longer measured in terms of just efficiency and lower costs, but also responsiveness to changes in demand, integration with suppliers and channel partners, and so on,” Kwok stated

“The definition of good logistics services has become more complex and multi-faceted. Staying ahead in logistics therefore requires new technological advances, new operational innovations, and even new business models,” he added. “It calls for a commitment to R&D [research and development] and continuous innovation.”

Complicating this already complex picture, however, is the rapid move toward “green logistics” on a worldwide front, Kwok noted.

“In particular, concerns over climate change are creating demand for supply chains with lower carbon footprints,” he said. “Shoppers, especially those in developed countries, are showing a preference for companies that demonstrate commitments to lowering their carbon footprint … [and] companies have responded.”

For example, he pointed to retailer Marks & Spencer, which targets to go carbon neutral by 2012. These companies will in turn put pressure on their logistics service providers to lower their carbon footprints, Kwok warned, adding a new dimension to what it means to deliver good logistics services.

“Besides market forces, we can expect stiffer regulation on carbon emissions in the future,” he added. “International discussions are well underway for a new regime to mitigate carbon emissions … [and] the transportation and logistics industry will be expected to play its part.”

Such efforts are already afoot here in the U.S., led by the Environmental Protection Agency and California Air Resources Board – efforts that will directly impact trucks and the logistics services they provide. Expect to see similar measures, though, in other parts of the world, which may balance out the competitive effect of such “carbon control” measures.

The key take away, however, is how good logistics services are increasingly viewed as a competitive skill in the world of freight management – and not just by the U.S. It’s a global view and one U.S. truckers must recognize so they can adapt and provide more value to their customers in this arena going forward.

“To be competitive in today’s global economy, U.S. companies need to be able to move products and goods securely, quickly and efficiently within our borders and beyond. America cannot compete successfully in the 21st century with a 20th century infrastructure.” –U.S. Commerce Secretary Gary Locke

The term “supply chain management” has long been an afterthought to much of the general public. Let’s face it: unless you are involved in the transportation industry, few people recognize the global effort required to stock the shelves of the supermarket, the Home Depot, the automotive repair facility, and on down the line.

So much of what we need and use every single day wends its way to where we obtain it though a complex web of factories, docks, warehouses, ships, planes, trucks, and countless human hands. Until I started covering the air cargo markets almost a decade ago, I myself didn’t realize how many fresh flowers or nice cutlets of farm-raised salmon came in fresh every day from countries like Brazil and New Zealand, respectively.

It came as quite a shock to me to literally sit up and realize that such fresh delicacies traveled distances that consumed the lives of famous explorers such as Ferdinand Magellan for years – in his case, leading to his death – in the span of a single day.

Yet that attitude is changing – and changing fast. Take the extraordinary meeting held in Washington D.C. the other day at the Ronald Regan Building. Entitled Game Changers in the Supply Chain Infrastructure: Are We Ready to Play? and hosted by BOTH the Department of Commerce and Transportation, it explored the importance of robust and efficient supply chain systems to the U.S. economy – and how the federal government is preparing to help reinvigorate such networks so America can be more competitive.

“At its most basic, a competitive domestic supply chain infrastructure represents our ability as an economy—as a nation—to move products and goods,” said Commerce Secretary Gary Locke in his written remarks.

“As governor of Washington State, I saw first-hand the importance of a strong supply chain infrastructure,” he said. “The exports and imports that flowed through the supply chains in Washington supported more than 10 percent of our private sector jobs. And 90 percent of Washington’s exporting companies were small and medium-sized enterprises, with fewer than 500 employees.”

While much of the debate over supply chain infrastructure focuses on international trade, he said, the fact is that domestic commerce is responsible for more than 85 percent of what passes through U.S. rail, trucking, air, and marine systems.

“What this means is that America’s supply chain infrastructure deficiencies don’t only impact the competitiveness of our foreign trade,” Secretary Locke emphasized. “They affect the strength of the entire American economy.”

Several experts were on hand to give their views on this subject – veterans of the supply chain trenches, as it were. They included Angel Mendez, Sr. VP of global supply chain management for Cisco; Douglas Oberhelman, group president for Caterpillar; Ron Lewis, VP-supply chain for Coca Cola Enterprises; and General Duncan J. McNabb, USAF, Commander of the U.S. Transportation Command.

Secretary Locke went on to say that the logistics sector today represents about 10 percent of U.S. GDP [gross domestic product] by itself – yet, by international standards, that’s considered relatively low, suggesting a high degree of efficiency, especially in comparison with other important economies that spend as much as 20 percent or more of GDP on logistics and transport.

“However, America’s job prospects depend on the health of the infrastructure that supports our domestic and international supply chains,” he stressed. “Of five major industry sectors that represent over 80 percent of the U.S. economy, four—manufacturing, retail, services, and agriculture and natural resources—are critically dependent on transportation. The fifth sector is the transportation and distribution sector itself.”

Last year, he noted that the U.S. Chamber of Commerce reported that employment in these four transportation-dependent sectors accounted for some 99 million U.S. jobs, or nearly 71 percent of the U.S. workforce. The transportation and distribution sector—including direct transportation, warehousing, and wholesale trade—account for an additional 7.5 percent of America’s workforce, nearly 11 million jobs.

“Our nation has long enjoyed a world-class transport infrastructure. But we are placing rapidly growing demands on aging infrastructure systems,” Secretary Locke warned. “We need to find new methods to move products more efficiently if we are to keep pace with the rest of the world.”

That means viewing the relationship between trade and transportation more broadly, in interconnected and interrelated ways that are much more complex. “Old solutions are not enough,” he said. “Supply chains today are being changed dramatically by forces that go beyond traditional transportation remedies.”

At every level of a supply chain, one sees more advanced information technology applications, more sophisticated equipment, more integrated business processes, the secretary noted – and these developments require higher levels of education and training, plus some means to fund them.

“Our challenge is to explore supply chain issues in an interconnected, intermodal way that cuts across the broad range of national priorities and sets the path to future success,” he said.

A bold vision, indeed. Now, however, the challenge is coming up with the blood, sweat, tears and funds to make it become reality.