Trucks at Work Blog

“This research quantifies how the mutual goals of resource conservation and emission reductions could be advanced by allowing Maine to apply state weight laws to its Interstate highways.” –Mike Card, president, Combined Transport, Inc.

I’m sure the howling is only beginning over the American Transportation Research Institute’s (ATRI) recent analysis touting the benefits of expanding the federal gross vehicle weight (GVW) exemption, based on the allowance for higher truck payloads in the state of Maine.

No doubt this is a far more complex issue than merely boosting allowable gross tonnage per tractor-trailer to 100,000 pounds versus the federal limit of 80,000 pounds on interstate highways. Drivers worry about hauling more freight for the same or less pay; state and federal highway officials are concerned about the impact higher tonnage per combination vehicle may have on roadways and bridges. So-called safety groups, of course, will be outraged at the thought of heavier vehicles operating next to everyday motorists.

Yet for all those issues and the glaring fact that ATRI is the research arm of the American Trucking Associations (ATA) – thus making it not exactly an impartial source – the data gleaned from this study is pretty compelling and is definitely worth mulling over as we try to figure out ways to make our freight transportation networks more efficient and environmentally friendly at the same time.

Mike Tunnell, ATRI’s director of environmental research and the principle investigator for this analysis of Maine’s pilot test of higher truck weights, took two 100,000 pound, six axle tractor-trailers (the trailer getting a third axle in order to handle the higher tonnage), both equipped with a 485-hp Cummins engine, and ran them through two detailed simulations: one truck taking state roads, the current route allowed in Maine for trucks in excess of 80,000 pounds, with the other taking the highway, in this case I-95.

The results are pretty interesting:

• Though longer, the truck using the I-95 highway route actually completed the journey in less time – anywhere from 26 to 33 minutes faster. This is due to the overall speeds of the vehicle, with the one on the highway averaging 60 to 62 mph, with the one on the state road going 38 to 42 mph.

• Less fuel was consumed as well by using the highway, anywhere from one to two gallons. In an interesting side note, just stopping at all the traffic signals on the state roads alone was responsible for consuming an extra gallon per trip.

• In terms of overall fuel efficiency, though the I-95 route was longer by about five miles in either direction, the 100,000 pound rig on the state roads posted 14% to 21% better fuel economy than its opposite on the state roads.

• Carbon dioxide (CO2) emissions – the most recent boogeyman in the climate debate – decreased anywhere from 6% to 11% with the heavier truck taking the longer, higher-speed highway route, compared to the local state roads. Again, stopping at traffic signals came with penalties, in this case boosting CO2 emissions by 6% alone.

• Particulate matter (PM) and oxides of nitrogen (NOx) and non-methane hydrocarbons (NMHC) emissions declined 3% to 8% by taking the longer highway route as opposed to navigating the shorter but slower stop-and-go state road route.

Extrapolating these findings over a week’s worth of heavy truck operations in Maine also resulted in some pretty significant efficiency improvements and environmental benefits. By putting 100,000 pound trucks on a longer highway route, total fuel savings could range from 338 to 675 gallons of fuel per week; CO2 emissions would decline by 3.4 to 6.8 metric tons per week, along with 33.8 to 93.8 fewer grams of PM and 8.3 to 24.8 fewer pounds of NOx and NMHC.

So, is allowing higher truck weights of 100,000 pounds on highways – trucks equipped with six axles to reduce the impact of that extra tonnage on roads and bridges, while adding braking power – the “silver bullet” we’ve all been waiting for in terms of how to further reduce fuel consumption and air pollution from heavy trucks?

In a word … NO.

Allowing higher truck weights is but one part of an effort to rethink and retool how we move freight in the U.S. Certainly, allowing tractor-trailers to carry more payload would boost productivity and require fewer trucks on the highway – a way, perhaps, to offset any reductions in drive time as the Federal Motor Carrier Safety Administration (FMCSA) embarks on a two-year effort to re-analyze hours of service (HOS) regulations.

Yet concerns over hauling more for less pay and how heavier vehicle weights affect highway safety are only two of a plethora of issues that arise when talk of boosting federal GVW limits begins in earnest – and they must be satisfactorily addressed, or the effort to raise tractor-trailer tonnage limits won’t go any farther.

“Trucking is not necessarily a competing type of transportation in many cases but a part of a transportation network that helps to make commerce work successfully where and when working together. One feeds into the other … the other sometimes being even water-borne delivery. This is a concept that only those integrally involved in the movement of freight really understand. I suspect that most people have never thought about it.” –Allan Berger

I trade some very enlightening emails with readers on a variety of subjects, and recently a real good one came from Allan Berger about how trucking really shouldn’t be viewed as a “stand-alone” mode of transportation anymore – and why it’s far more valuable when viewed as an “integrated” part of the supply chain

To illustrate his point, Berger told me about visits he made several years ago to major air cargo hubs such as Memphis, TN (home to FedEx), Louisville, KY (United Parcel Service’s base of air cargo operations) and the former Airborne Express’ central location in Wilmington, OH (an air hub that fell on hard times when DHL retrenched last year).

“There were slews of tractor trailers not owned by these three express carriers’ at all three sites that were dedicated to bring in freight by 2:00 a.m. and leaving with freight after 2:00 a.m.,” he recalled. “And 2:00 a.m. was a madhouse at all three places as planes started landing as if coming back from a massive bombing mission. But that’s when I learned that UPS ‘red’ did not mean next day UPS Air, and the Fed Ex Next day did not mean it shipped on a Fed Ex plane, and that Airborne’s equivalent service did not necessarily mean all of their freight would be shipped by air – all despite their names.”

This isn’t a criticism, Berger stressed. Rather, he pointed out that obligation of each express carrier is to deliver their freight – be they envelopes, packages, pouches, boxes, etc. – within the time frame that represents the service paid for.

“As to how the package arrives on time is left up to the carrier,” Berger noted to me. “If it makes more financial and logistical sense to use trucks for certain freight between and two cities – for example from Wilmington, OH to Columbus, OH, or from Wilmington, OH to New York City – then the freight might go by truck. If it’s longer distance, UPS might elect to [send it] truckload to, say, the West Coast; or put it on an intermodal train rather than use air or trucking.”

The point, he said, is that when shippers ask for overnight, next day, second day, next business day, etc., all they REALLY care about is that the package is delivered when it has been contracted to be delivered – however it happens.

“Carrier pigeons are okay if that works also,” Berger said. “That means trucking is not necessarily a competing type of transportation in many cases but a part of a transportation network that helps to make commerce work successfully where and when working together.”

That “working together” philosophy is partly behind the recent creation of the North American Council for Freight Efficiency (NACFE). Guided by the Rocky Mountain Institute, this council’s ultimate goal is to find ways to move the same amount of freight currently shipped in North America, but only use half the energy. It’s a tall order, no doubt – one that require a lot of rethinking where trucking is concerned.

[In that vein, Mike Ogburn, a vehicle consultant with RMI, talks about how even fundamental measurements of transportation energy efficiency – “fuel economy” parlance – can be difficult to gauge with accuracy.]

Another big conundrum is changing the public perception of trucking and the freight-carrying industry as a whole – because public perception is driving the political process in ways that can be detrimental to trucking’s efficiency; something that also significantly affects the environmental impact of trucking as well.

[John Woodroffe, head of the University of Michigan’s Transportation Research Institute (UMTRI) safety analysis division, talks about that impact below.]

Finally, it’s also important to recognize that trucking is a very complicated industry – something that often times gets overlooked in the oversimplified freight calculation of moving goods from point A to point B. With emission regulations making the cost of even the most basic of Class 8 tractors equal to that of a Ferrari in some cases, it’s important to recognize in a broad sense how that affects the overall cost of moving freight.

[Amory Lovins, chief scientist and chairman of the Rocky Mountain Institute, shares some thoughts on that subject line below.]

For these reasons, being an “integrator” within the supply chain could prove very beneficial to trucking in a lot of ways – as well as help the transportation chain maintain both efficiency and environmental goals at the same time. It’s a line of thinking worth exploring in days and months ahead.

“The conversion of highway freight to the more efficient, cost effective, safer and more environmentally friendly services that we jointly provide, will not only benefit shippers and the general public, but our shareholders alike.” –Kirk Thompson, CEO of J.B. Hunt Transport Services, on the carrier’s new intermodal contract with railroad Norfolk Southern

It’s going to be interesting to track the progress of J.B. Hunt Transport Services’ new intermodal contract forged with Norfolk Southern Corp. last week. The deal is designed to accelerate the conversion of traditional truck traffic to truck-rail intermodal transportation – expanding a service designed to be competitive with truckload moves, offering both transcontinental and local intermodal service in the eastern half of the U.S.

“Our new services with J.B. Hunt will provide shared incentives to grow volume and revenues by converting substantial volumes of freight from highway to rail,” said Norfolk Southern CEO Wick Moorman. “We look forward to working with the J.B. Hunt team to offer high-speed premium services to domestic intermodal customers over our entire network, including our new Crescent Corridor route, from New England, northern New Jersey and Pennsylvania south to Memphis and New Orleans.”

It may seem anathema to fellow truckers to willing fork over tonnage to their arch competitors in the transportation field, but J.B. Hunt has never played it that way. The carrier’s late founder, Johnnie Bryan Hunt himself, willingly dove head first into the intermodal waters over two decades ago. He could clearly see the profit potential that others didn’t in working with the railroads to provide joint freight service — buying rail capacity at wholesale prices, then selling it bundled with his truck capacity at retail prices, keeping his costs low as his trucks didn’t have to run a lot of miles or burn a lot of fuel.

I’ve written about how Hunt’s first stab at intermodalism wasn’t a rousing success — and he’d pretty much retired by the time intermodalism finally came into its own for his fleet, along with dedicated contract carriage services. But it’s a path that is shining brighter every day from the carrier’s perspective, at least.

In the company’s third quarter earnings report this year, Kirk Thompson, J.B. Hunt’s CEO, said the carrier’s ntermodal division continued to gain market share, with overall load volume growing at 9% during the third quarter this year versus the same period of last year – as well as outpacing the 5% growth in the first quarter and 8% growth in the second quarter in 2009.

Yet the carrier said eastern volume growth slowed during the third quarter as customers had ample truck capacity at substantially lower prices than a year ago, combined with fuel prices that were also 40% lower than a year ago.

“Still, our eastern volumes increased by 12% during the current quarter, while our transcontinental volume continued to rebound with 7% growth over the same quarter a year ago,” said Thompson. “However, revenue declined despite the increase in volume as a result of three factors: an extremely competitive bid season, a 1% decline in the average length-of-haul from the comparable period and fuel surcharge revenue that was down more than $70 million from a year ago.

It’s that “bid activity” during what Thompson called “this unique time in the freight economy” that is the major challenge – and is probably one reason why Hunt forged this new intermodal contract with Norfolk Southern, so the carrier could better balance short term market realities against long term strategic objectives.

“We believe, as our rail partners continue to make multi-year investments to improve service and network efficiency and as shippers remain under economic and environmental pressure to find sustainable alternatives to traditional trucking, the long term outlook for our intermodal business is very attractive,” said Thompson. “As a result, it is important for us to continue to make strategic investments even in the midst of these harsh market conditions.”

This is philosophy also reflected in the debate over the nation’s freight policy focus. “Given the multiplicity of today’s transportation challenges including the deterioration of infrastructure, insufficient capacity, environmental concerns, and high fuel prices, our nation requires an intermodal transportation policy,” noted Steve Van Beek, president and CEO of the Eno Foundation.

“While passenger transportation has traditionally dominated our transportation thinking, it must now be joined by a focus on freight, leading to the development of an integrated national intermodal transportation policy,” he said. “Such a policy will recognize the needs of passengers and shippers, the economy, and the other interests affected by transportation.”

“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.”