Tech Tools Serve Retailers’ Diverse Needs

By Chandra Allred

Q: What do retailers need to know about working with 3PLs today?

A: Retailers are challenging third-party logistics (3PL) providers to supplement their offerings with a broader range of services. To obtain and retain business, 3PLs must meet retailers’ diverse reporting, visibility, and delivery needs—yet not increase their cost structure.

Achieving this goal is particularly problematic without adaptive software. There is no one-size-fits-all solution for carton tracking. 3PLs using multiple platforms must integrate that data, not only between carton-tracking systems, but also with accounting and other enterprise systems. The more manual integration is required, the more it affects both 3PLs’ efficiency and retailers’ shipping rates. Logistics providers who choose agile solutions will be better positioned to meet retailers’ varied needs.

Additionally, 3PLs with data visibility at both the micro and macro levels can offer better performance. It’s critical to be able to see what’s in any carton, at any time, anywhere in the delivery process. But it’s also important to have big-picture visibility, such as on-time delivery and on-time performance across the enterprise.

Q: What technology trends have the most impact on retail distribution?

A: One trend with a lot of potential is the ability to repurpose data across functions. Automating a single process increases efficiency, but when the data from the automation of one process can be shared to automate another process elsewhere in the enterprise or supply chain, it can create an exponential advantage.

For example, many retailers use data provided in carton tracking to populate enterprise systems. It’s a seemingly obvious, but very innovative, idea that does away with the previous model of re-scanning cartons at the store. If only one hour per week of time were saved at $10 per hour at 1,000 stores, the annual savings would be $520,000—simply by eliminating the need for store personnel to re-scan cartons.

Innovations like this save not only pure labor costs, but also the opportunity cost associated with pulling associates off the sales floor. It’s a classic example of using technology to enable employees to focus on the activities of their core business.

Q: What should retailers consider when choosing a technology provider?

A: Every retailer faces a unique set of business challenges. Technology providers should offer innovative ways to modify applications to meet these needs. Whether it’s a variation of distribution center bypass, moving wholesale freight with a carton-tracking system designed for store delivery, or a custom store operations Web site for expected deliveries, customization is key.

Building custom applications from scratch is both time- and cost-prohibitive. For both 3PLs and retailers, investing in a technology partner that supports customization and flexibility at a moderate cost is a strategy for long-term adaptability and growth.

Managed technology services are an emerging twist in the outsourcing paradigm, placing non-asset-based 3PLs in direct competition with traditional IT vendors. The upside for shippers is considerable. Service providers are using TMS solutions to become more integrated with their customers. Sophisticated analytics allow 3PLs to understand where problems are occurring at the local level, as well as upstream and downstream in the supply chain. Combining this data with strategic business process improvements addresses recurring problems at their root cause. This enables 3PLs to grow their business organically and cross-sell solutions across more functional areas.

Offshoring & Nearshoring

Global supply chain management is one area where many 3PLs have already extended their reach with great success. A decade of offshoring demand has given the third-party logistics sector considerable penetration in developing Asian and Southeast Asian markets, and emerging outsourcing locations such as South America and Eastern Europe. Global coverage is an afterthought for many 3PLs. Only 21 percent of those surveyed indicate global logistics as a challenge, down from 23 percent in 2011.

Outsourcing ultimately begins at the point of demand. Building on last year’s data, 91 percent of surveyed 3PLs serve the North American market, while only 13 percent operate exclusively in the United States (see “Geographic Scope” below). Shippers exhibit a similar and expected pattern, with 64 percent (51 percent in 2011) outsourcing in North America and 30 percent (43 percent in 2011) in the United States alone. The respective increase and decrease in North American and U.S. outsourcing activity indicates that domestic shippers are increasingly operating across borders—a positive sign for NAFTA trade, especially after the United States and Mexico finally came to resolution regarding cross-border truck movements.

GEOGRAPHIC SCOPE

Farther afield, Europe is now the top offshore target among 3PLs (50 percent), displacing Asia (46 percent), and outdistancing Southeast Asia and India (43 percent), and South America (41 percent). Europe’s recession has triggered a number of high-profile acquisitions—UPS and FedEx among the more active companies—which may signal further growth opportunities for North American 3PLs looking to establish a presence in the profitable Asia-European trade.

Among surveyed shippers, the hierarchy of global outsourcing locations remains largely unchanged—with one notable exception. While 28 and 27 percent of respondents identify Asia and Europe, respectively, as places where they use 3PLs, South America has climbed eight percent since last year (20 percent), topping Southeast Asia (18 percent). This is a clear indication that some industries are locating more offshore activities in the Latin American market—a consequence of secondary sourcing strategies, cheaper total landed logistics costs, and faster speed to market.

One other telling detail: while only 28 percent of 3PLs document nearshoring/reshoring as a shared strategy to help customers manage supply chain challenges, 48 percent include alternative sourcing arrangements in that conversation. In effect, one is a subset of the other. But this anomaly suggests nearshoring decisions are very much demand-driven.

Shippers have capitalized on 3PL inroads in global areas where they source, manufacture, or sell into. This leverage is increasingly relevant as economic recession in Europe sweeps eastward into Asia, adding more volatility to global supply chains. Manufacturers are especially sensitive to the type of political and social upheaval that inevitably befalls developing countries stressed by economic crisis. Labor unrest threatens parts availability, which, in turn, can shut down supply lines.

Add the threat of natural disasters to a complex supply network, and risk assessment and management become a priority. Forty-four percent of surveyed 3PLs see this as a challenge for their customers. Interestingly, only 13 percent of logistics service providers identify contingency planning as a challenge within their own industry. For smaller service providers without expansive networks and redundancies built into their operational footprints, this may be a cause for concern—especially for an outsourcing customer that is counting on its third-party partner to allay such risk.

For shippers, expanding into new markets for both selling and sourcing purposes is also a challenge, according to 24 percent of shipper respondents (see “What is the Greatest Challenge Shippers Face” below). 3PLs that have established local networks and assets on the ground are well-positioned to help companies penetrate new countries or regions without the risks and start-up costs of going it alone. Forty-four percent of service providers offer global trade services, while 71 percent have import/export/customs capabilities.

3PLs are critical links in global supply chains, whether operating co-managed warehouse facilities in the Netherlands, coordinating inbound transportation in coastal China, or expediting cross-border freight between the United States and Mexico. Given market fluctuations in Europe, a weakened U.S. dollar, and Asia’s increasing appetite for U.S.-produced goods, new export demands are emerging. U.S. East Coast ports have already witnessed a shift in import/export balance favoring the latter. Beyond this, the Panama Canal’s 2015 deadline for adding a third set of locks, and doubling throughput capacity, is expected to shake up global sourcing and domestic distribution dynamics.

U.S.-anchored supply chains will have to adjust and react to new growth opportunities. 3PLs will be front and center as importers and exporters consider their next moves.

Shipper Yin & 3PL Yang

Last year in 3PL Perspectives we noted, “on the whiplash end of a devastating recession, companies were still wary that an apocalyptic horseman might lay another one down on the U.S. economy.” That hasn’t happened yet. But U.S. economic unease is still top of mind for many companies.

3PLs arguably earn their keep in times of economic uncertainty—when shippers don’t have a clear path toward future demand, and count on third-party counsel to guide decision-making. While technology investment and global coverage are important considerations, the true measure of successful partnerships ultimately lies in transportation and logistics minutiae.

For example, “cutting transport costs” remains the top challenge for shippers, according to 66 percent of shipper respondents, followed by “improving customer service” (33 percent).

3PLs share their customers’ pain. Eighty-two percent see “cutting transport costs” as the most important challenge shippers face. “Business process improvement” (54 percent), and “scaling inventory to demand” (51 percent) follow accordingly. Interestingly, in 2011, 42 percent of surveyed 3PLs identified business process improvement as a shipper challenge. Managing inventory was more important.

By contrast, only 22 percent of shippers see business process improvement as an area of need; inventory management (17 percent) ranks just below.

PROCESSES & PLATFORMS

Clearly, 3PLs now see opportunities where their customers can better manage inventory and transportation costs by embracing more sophisticated supply chain processes , such as vendor-managed inventory, pool distribution, and inbound logistics. Shippers might not have the wherewithal to consider these initiatives without a 3PL’s guidance. And logistics service providers are building a technology and service platform that allows them to penetrate customer supply chains deeper than ever before. The new outsourcing paradigm is a far cry from transactional relationships bought and sold on  capacity and price alone.

Inventory management is still a problem for shippers that are fixated on rising costs and can’t forecast variable demand. While consumer spending has picked up, some retailers are still wary about replenishing more at the risk of carrying too much stock. Some are counting on wholesalers and suppliers to hold inventory farther upstream until orders drop. Alternatively, 3PLs are capable of mediating this variability in-house, through leased facilities, or by managing company-owned facilities.

Also, given constant changes in sourcing and selling locations, and the cost of transportation, 3PLs are better equipped to help customers realign their distribution networks—especially where demand may be speculative—and even provide managed or co-managed warehouse services as needed. For example, the Panama Canal’s expansion project is already impacting where U.S. retailers locate stores and DCs in the fast-growing U.S. Southeast. Fifty-one percent of 3PLs identify DC network realignment as a viable strategy to help shippers mediate these demand fluctuations.

Outside the four walls, shippers may eventually find themselves looking to 3PLs when capacity tightens and a dormant driver shortage resurfaces. Apart from rising costs, third-party logistics providers count “capacity” (55 percent), “staffing, training, and other HR issues” (40 percent), and “government regulation and compliance” (39 percent) as outstanding concerns. Much of this apprehension is due to the U.S. Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability (CSA) and Hours of Service requirements, which have yet to be enforced. Given the attrition of qualified drivers, and the standards that will be required to qualify drivers—who will have fewer hours to work— shippers, carriers, and 3PLs share many transportation concerns.

But there is also reason for optimism. In 2012, 84 percent of surveyed 3PLs indicate they offer intermodal services. More telling, 74 percent provide rail-specific capabilities, compared to 68 percent in 2011. As a strategy to help shippers circumvent looming capacity issues, 49 percent of 3PLs view intermodal transportation as an appropriate call to action.

Intermodalism is the path of least resistance as U.S. highway infrastructure and congestion constraints continue to raise burrs in the U.S. Congress—without any long-term resolution in sight. As long as capacity, transportation costs, and sustainability remain latent concerns, and railroads, carriers, and 3PLs continue investing in the necessary infrastructure to make transshipment between modes more seamless, multi-modal solutions will grow.

One & Done?

Identifying how and why 3PL arrangements work is no easier than figuring out what leads to broken relationships. When asked to choose, 79 percent of shippers prefer 3PLs that can deliver customer service over cost. It’s a popular answer that speaks to the partnership many companies have developed with their third-party logistics partners over the past few years.

The number-one reason for failed outsourcing partnerships among shippers is “poor service” (50 percent), followed by “failed expectations” (24 percent), “cost” (10 percent), “more competitive options” (seven percent), and “loss of control” (six percent). Cultural dissimilarities and lack of communication make up the difference (see “What is the Number-one Reason for a Failed 3PL Partnership?” below).

What is the Number-one Reason for a Failed 3PL Partnership?

According to Shippers

Poor Customer Service (50%)

Failed Expectations (24%)

Cost (10%)

More Competitive Options (7%)

Loss of Control (6%)

Cultural Dissimilarities (2%)

Other (1%)

According to 3PLs

Failed Expectations (50%)

Poor Customer Service (16%)

Cultural Dissimilarities (10%)

More Competitive Options (9%)

Other (7%)

Cost (6%)

Loss of Control (2%)

3PLs, naturally, see things differently. They blame “failed expectations” as the number-one reason partnerships don’t succeed (50 percent), with “customer service” still a distant second at 16 percent, and “cultural dissimilarities” at 10 percent. “Cost” is only a contributing factor, according to six percent of 3PL respondents.

There will always be a disconnect between what 3PLs and shippers view as the discriminating factor in failed partnerships. That’s to be expected. Often the problem is derivative of poor alignment at the outset of a contract—whether it’s a matter of cultural incompatibility or a failure of one or both parties to understand the needs and/or expectations of the other.

As much as 3PLs relish the opportunity to grow their business with existing customers—becoming more involved in their operations and cross-selling services and capabilities across different functional areas—there is also recognition that the 3PL industry has evolved to a point where unique providers offer best-of-breed solutions. Increasingly, one 3PL is not capable of meeting the specific needs of a customer, especially across lengthening supply chains.

In 2012, 89 percent of 3PLs (the same as 2011) indicate customers should consider partnering with more than one service provider, while only 11 percent feel customers should work with one partner. Two years ago, 81 percent leaned toward multiple partners.

Shippers have greater flexibility and opportunity to localize specific needs and compartmentalize outsourcing activities and partners accordingly. This trend will likely pave the way for more lead logistics and fourth-party logistics arrangements, where one service provider orchestrates operations among the others. Fifty-four percent of surveyed 3PLs identify 4PL/LLP partnerships as a growing strategy; 71 percent currently offer that capability.

Read the article in its entirety at InboundLogistics.com

3PL Perspectives 2012: Shippers and 3PLs—Perfect Together

By Joseph O’Reilly

In the supply chain, some things just go together, beginning with the most obvious—supply and demand. Demand directs supply in an endless cascade of order and shipment transactions, manufacturing, transportation, and warehousing/distribution processes, and countless functional synapses firing every which way between. Everything occurs in harmony with demand. For many companies, it’s all a purposeful blur.

But connectivity is paramount in today’s supply chain. Nowhere is this more important or apparent than in the synergy that exists between companies and their third-party logistics (3PL) providers. Pairing third-party with logistics creates a modicum of objectivity in the middle of the buyer and seller relationship. Tactically, the 3PL can fill a very basic asset need. Strategically, its detached perspective offers the clarity and oversight necessary to orchestrate and execute myriad transportation and logistics actions along the supply chain.

3PL and shipper partnerships have always shared these features to a certain degree. But the maturation of value-added logistics capabilities beyond transactional services, the emergence of gainsharing strategies, and economic crisis have collectively upped the ante for outsourcing collaboration. This reality has become abundantly clear over the past few years.

Growth & Development

Demand for transportation and logistics outsourcing remains on a solid arc as shippers look to divest non-core functions and focus on their own unique value propositions and growth efforts—especially as the U.S. economy slowly digs out of an entrenched recession. Businesses understand the growing importance of properly managing supply chain functions, and have targeted 3PLs to fill this corporate need.

Mirroring last year’s numbers, third-party logistics providers responding to the 2012 3PL Perspectives questionnaire report a steady stream of new customers, with 88 percent growing their client base by at least five percent—compared to 89 percent in 2011 and 73 percent in 2010. By contrast, only two percent cite business attrition, compared to seven percent just two years ago.

While transportation and warehousing is still core, 3PLs continue to adapt as shipper demands evolve. Today’s service provider is capable of piecing together and integrating multiple transportation and logistics disciplines—from playing freight broker and providing managed TMS services, to operating co-shared distribution facilities and pooling freight. Increasingly, investments in proprietary technologies offer additional incentives for shippers to partner with 3PLs. This allows outsourcers to tap best-of-breed solutions without the cost and liability of constantly updating and upgrading systems.

At the same time, 3PLs remain committed to filling core needs, especially equipment, freight capacity, and warehouse space. When the market eventually recovers and shippers start looking for available trucks, asset-based logistics service providers will once again find themselves in a position of strength.

Customer demand has yielded considerable returns over the past year in both sales and revenue growth. Ninety-two percent of 3PLs grew sales by at least five percent (91 percent in 2011). By comparison, 81 percent report profit growth in excess of five percent, down from 90 percent last year.

This revenue anomaly is largely due to the increase in fuel costs, which began a steep and sustained climb in early 2011, and have remained relatively high ever since. Only recently did prices fall below February 2011 figures.

Still, 3PLs have been profitable. Both warehouse and trucking capacity have tightened after prolonged softness in the market, allowing some asset-based providers to recapture lost gains. The supply chain upsell has been a familiar and successful tactic for 3PLs that are shifting outsourcing business from traditional transactional relationships to more integrated partnerships.

Not only are integrated partnerships a means to expand and retain existing business, they also help justify outsourcing’s value proposition. 3PLs can mine greater efficiencies and economies when they have more control over a customer’s operation. Many are encouraging sales teams to cross-sell different functional capabilities. For example, integrated logistics services are becoming much more prevalent. Eighty-five percent of 3PLs report having this capability, compared to 79 percent in 2011.

Perhaps more telling, service providers overwhelmingly attribute growth to organic selling (82 percent), and a combination of organic selling, and mergers and acquisitions (18 percent). For the first time in eight years of research, no respondents cited M&A alone as a means for growth (two percent in 2011)—suggesting there are ample opportunities to sell both existing and new customers.

Alternatively, economic unpredictability and demand variability continue to challenge businesses, while strengthening the business case for outsourcing. When it comes to putting the right amount of inventory in the right place at the right time, 3PLs prove their value.

Anatomy & Physiology

Over the past 10 years, 3PL anatomy has transformed noticeably as non-asset-based providers continue to emerge and compete with traditional warehousing and trucking-based solutions providers. Even as recently as 2007, there was a relative balance between companies that identify themselves as non-asset-based and those that pass as both asset- and non-asset-based—44 percent and 42 percent, according to IL’s 2007 3PL Perspectives. But that divide is widening.

In 2012, 47 percent of surveyed 3PLs indicate they operate as non-asset-based service providers, with 37 percent reporting their business structure as both asset-light and non-asset-based. Comparable to last year’s numbers, 16 percent are purely asset-based operations.

Given the fact that 3PLs are hyper-sensitive to market demand, the capacity to morph between carrying assets and providing objectivity has become a successful ploy for navigating good times and bad. Many smaller trucking and warehousing companies inevitably went out of business during the recession. Others quickly jettisoned assets to reduce operational costs. Some invested in value-added logistics capabilities to expand their operational breadth.

Non-asset-based 3PLs with functional areas of expertise—freight bill audit and payment, freight brokerage, import/export, and customs brokerage—are looking at ways they can expand their value proposition through technology and talent investment, or even vertical specialization.

For example, the e-commerce boom has generated demand for third-party logistics services that cater specifically to fulfillment. Even big-box retailers are getting into the game now by driving sales through their online channels, often vetting vendors and testing new products prior to rolling them out to brick-and-mortar stores. As a testament to this trend, 48 percent of surveyed 3PLs provide direct-to-home delivery services. In 2011, that number was 26 percent.

THE OLD & THE NEW

A number of new entrants have joined the 3PL party—traditional freight brokers, forwarders, consultants, IT companies, manufacturers, and even healthcare providers—at least in terms of how they are now casting their business proposition to prospective customers. Where there is functional need, and companies have the resources and networks to manage transportation and logistics, shippers inevitably follow.

For the 3PL sector, technology has become both a selling point and a means to better service. When asked to name the most important challenges facing the third-party logistics segment, 61 percent of 3PL respondents cite “technology investment”—second only to “rising costs.” By comparison, only 15 percent of shippers see this as a challenge, likely because a wealth of affordable solutions are available to select from, and/or their 3PLs have already made that investment. This trend follows last year’s research.

More than 50 percent of 3PLs are exploring investment in cloud-based solutions, reflecting both the efficacy of Software-as-a-Service deployments and their appeal to outsourcing customers. Specifically, 85 percent of logistics service providers are acquiring transportation management systems, up nearly 10 percent from 2011. Optimization technologies (63 percent) and warehouse management systems (56 percent) are other targeted areas—reflecting customer pain points.

Many 3PLs are partnering with IT vendors or even logistics service providers to acquire these types of solutions. Others have developed their own proprietary solutions. On the TMS side especially, more 3PLs are providing managed transportation services that leverage technology sophistication and business process execution in a revenue-sharing arrangement. Forty-five percent of surveyed 3PLs see this as a strategy that lets them help shippers address current challenges (see “What Strategies are Shippers and 3PLs Using to Manage Current Challenges?” below), compared to 36 percent last year.

Continued in our 8/24/2012 post.

According to Lara Sowinski, Editor-in-Chief of Food Logistics, “The companies on this year’s list offer tremendous value to their customers in the food and beverage sector, starting with their understanding of the requirements and demands unique to this space. For one, food and beverage supply chains operate in a highly regulated environment where safe and secure transportation and warehousing of the product, which oftentimes involves temperature-controlled facilities and equipment, is paramount. In addition, the constant introduction of new products coupled with increased consumer demand for more fresh produce raises the stakes even higher.”

Food Logistics’ Top 100 3PL & Cold Storage Providers list serves as a resource directory of third-party logistics and cold storage providers whose products and services are critical for various companies in the food and beverage supply chain, ranging from food producers and manufacturers to retail grocers and small format markets.

We’re proud of our team here at Interstate.  Year after year, they provide the best customer service in the industry and I believe that their dedication is the reason that Food Logistics and other industry publications honor us each year with awards for being the best in our industry.  I want to thank our team for their hard work and ingenuity and we all want to thank our customers for their loyalty over the years.

Broker Bond Clash Continues After Law Sets Higher Minimum (continued)

Voltmann told TT in March that the naysayers of the surety increase were “fear mongers” making “specious arguments” (3-26, p 29).

“They’re being spread by the people who this legislation is designed to stop — the cheats, the churners and the thieves,” Voltmann said.

Lamb said previous attempts to get similar surety increase legislation passed have failed when subjected to congressional debate.

“It was an anti-competition move not to fight fraud but to drive small brokers out of business,” Lamb said. “It was slipped in the bill under the radar and was not subjected to debate.”

Lamb said his group, which has about 135 members, will attempt to get Congress to reconsider the issue in future legislation. “We’re not going to roll over and let this happen,” he said.

In a statement following the bill’s passage, Pacific Financial Association, a firm that underwrites bonds for 5,000 brokers, said it is optimistic it will be able to help brokers comply with the higher bond requirement.

“While Pacific Financial initially had estimated that such new regulations may eliminate a large number of brokerage operations as independent business enterprises, we are certain that the provision in the final text of the transportation bill authorizing the use of ‘group surety bonds’ will enable us to ensure your compliance without effective disruption of your current procedures,” the statement said.

Voltmann disputes that TIA only represents large brokers, saying that 60% of its members have revenues of $5 million or less. And, he said, brokers can secure bonds at a cost of 1% to 5% of the surety requirement.

“For a broker doing $5 million a year, which is five loads a day, the bond is going to cost you as much as $5,000. That’s $5 a load — a cup of Starbucks,” Voltmann said. “You may not like it, but is it really going to put you out of business? If you’re running that close, maybe you shouldn’t be handling other peoples’ money.”

Voltmann claims that the majority of the broker industry is financially sound and well run.

“Yes, this is a little speed bump for them,” Voltmann said. “But it’s not going to put them out of business.”

However, Vince Santiago, owner of VETrans LLC, a small Covington, Wash.-based broker, said the new bond requirement could put him out of business.

“I called several underwriters to check this out, and they said they wanted one-and-a-half times the surety requirement to cover the bond,” Santiago told TT. “I don’t have $112,000 sitting around. I don’t know what I’m going to do.”

Broker Bond Clash Continues After Law Sets Higher Minimum

By Eric Miller, Staff Reporter

This story appears in the July 23 print edition of Transport Topics.

A provision in the recently enacted federal transportation legislation aimed at protecting truckers and shippers by dramatically raising the bond freight brokers must pay has ignited a storm of controversy.

The provision, which will raise freight broker surety requirements to $75,000 from $10,000, is intended to make it more difficult for “fly-by-night operators” to do business, said Robert Voltmann, president and chief executive officer of the Transportation Intermediaries Association, a group composed mostly of 1,300 brokers and freight forwarders.

The increased surety requirement, which was slipped into the transportation bill as a last-minute amendment, is supported by TIA, American Trucking Associations and the Owner-Operator Independent Drivers Association — three trade groups that often disagree on transportation legislation. But smaller brokers claim it is a move by larger brokers, represented by TIA, to put them out of business, and some members of a smaller broker association have sent emotional e-mail messages to Voltmann.

For example, Voltmann received an e-mail from Jim Murrell, president of JMG Freight Group LLC, Franklin, Tenn., who asked: “Are you the president, CEO of the Transportation Intermediaries Association for the large intermediary companies or all intermediaries? Please remind me again who you represent?”

Voltmann said the new federal provision will address what has been for years a “Wild West mentality” in the broker industry and will allow those who are cheated by brokers to pursue civil damages in court. It also will require carriers and brokers to have separate operating authority and to indicate in all transactions whether they’re acting as brokers or carriers, Voltmann said.

Raising the bond has been widely debated for years, and various past attempts to implement the higher requirements failed to pass Congress.

Voltmann said the higher bond requirement will help to put out of business load-board double-brokering scammers such as Kulwant Singh Gill, who was sentenced to more than 10 years in prison in April for defrauding 165 brokers and motor carriers of more than $1 million (4-16, p. 5).

“By making the bond higher, we actually created larger pools of money to sue against,” Voltmann said. “We can go after the trust company. We can put class actions together.”

“This is a game changer, but not just because the bond went up,” Voltmann told Transport Topics. “There are things [in the bill] that will start addressing some of the fraud that crept into the marketplace because DOT refused to be the sheriff.”

A spokeswoman for the Federal Motor Carrier Safety Administration, the agency under the U.S. Department of Transportation that would be responsible for policing the new federal mandate, did not respond to a message seeking comment by TT’s press time.

Prasad Sharma, vice president and general counsel of ATA, said he is hopeful the legislation will be a step toward reforming the broker bond surety industry and help eliminate some of the fraudulent practices that sometimes leave carriers unpaid when dealing with brokers.

“DOT always had the authority to set the bond amount required to register as a broker,” Sharma said. “But on numerous occasions, they have declined to increase that amount from the $10,000 that was set back in the late 1970s.”

Todd Spencer, executive vice president of OOIDA, said the bill’s language will close loopholes that crooked brokers have used to defraud truckers.

“The bad guys have gotten away with exploiting the system for far too long,” Spencer said. “When fully implemented, the increased bond, coupled with greater accountability that comes with it, will be a win-win for truckers and the many legitimate brokers they deal with.”

But the new federal provision has drawn the wrath of a trade group of small brokers, the Association of Independent Property Brokers and Agents, which has accused TIA of attempting to put small operators out of business.

James Lamb, president of AIPBA, said the legislation’s increased surety requirement is an “underhanded” attempt by “mega brokers” and TIA to eliminate their smaller competitors.

Lamb even charged that Voltmann was pushing the higher surety requirements to help TIA’s bond underwriting program, an allegation that Voltmann denied.

Continued in our 7/27/2012 blog.

Why does this matter? Because it will push out the vast majority of “small brokers” (which represent 80%+ of freight brokers in the country) and funnel the business to the larger brokers (like Interstate Transport) that are able and eligible to get a $75,000 bond.

It will also force a lot of small brokers to align with the large brokers as an agent or employee so they have a place for their book of business yet are relieved of the financial responsibilities and back office functions.

Capacity will tighten further due to this law which means shippers will have to scramble to find capacity from the larger brokers that remain.  Read more below in the article from The Journal of Commerce.

Transport Bill Raises Forwarder, Broker Surety Bond Requirement

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Increased bond surety to $75,000 aimed at preventing fraud

The newly-passed surface transportation bill requires freight brokers and forwarders to have a $75,000 surety bond, a mandate that supporters said will help prevent fraud in the industry.

Transportation Intermediaries Association President and CEO Bob Voltmann said the requirement will help prevent “underfunded companies” that have given the industry a “black eye.” TIA backed language in the House and Senate bill versions calling for a $100,000 surety bond requirement, but Voltmann said the slightly smaller bond minimum “is still a significant improvement.”

The Association of Independent Property Brokers and Agents opposed the raising of the surety bond from the existing $10,000 level, saying it would put thousands of small brokers out of business. The $75,000 surety bond requirement mirrors that required of non-vessel operating common carriers.

The transport bill also tightens regulations on brokers, forwarders and trust companies, and it forbids motor carriers from from re-brokering freight without proper broker authority and bond. Customs brokers and air freight forwarders will remain exempt from such changes.

Trucker jobs go unfilled, leading to delayed deliveries

Attention out-of-work Americans: Want to be a trucker?

A worsening shortage of truck drivers is pushing up freight rates and delaying some deliveries, defying the weak economy, high unemployment and falling gasoline prices.

“It’s getting harder to get drivers,” says Mike Card, president of Combined Transport of Central Point, Ore., and incoming chairman of the American Trucking Associations. “I could hire 50 guys right now.” He now employs 393 drivers.

Many Baby Boomers are retiring and fewer young people are interested in long-haul-trucking careers that often require drivers to be away from home for weeks at a time, says Ben Cubitt, senior vice president of Transplace, which manages freight delivery for businesses.

Despite the 8.2% national jobless rate, many unemployed construction and factory workers can’t afford the $4,000 to $6,000 cost of a six-week driver-training course, says Rosalyn Wilson, senior business analyst of consulting firm Delcan.

In addition, she says, truck drivers must be at least 21, leading many 18-year-old high school graduates who might consider trucking to instead pursue plumbing or other trades.

Another barrier: The government began publicizing the safety ratings of trucking companies 18 months ago, prompting some carriers to hire only drivers with unblemished records and narrowing the pool of qualified applicants.

The annual driver turnover rate at large carriers rose to a four-year high of 90% in the first quarter from 75% a year ago, according to the trucking association. The turnover rate at small carriers jumped even more sharply in that period, to 71% from 50%.

The shortage has increased average driver salaries about 5% this year to $45,000 to $50,000, says Noel Perry, managing director at FTR Associates.

The crunch is expected to become even more dire next year when stricter federal limits on the number of hours drivers can work take effect. That safety move will force companies to hire more drivers.

Driver shortages are effectively limiting truck capacity and helping push up freight rates by 2% to 5% this year, despite the sluggish economy, says analyst Benjamin Hartford of research firm R.W. Baird. Also driving up rates are rising wages and truck prices that have increased as much as 40% the past few years because of modernized engines that must meet tougher emissions rules.

Card of Combined Transport says 10% of his deliveries are one or two days late because he doesn’t have enough drivers.

Trucking Shares Outpace Other Transport Equities, Standard & Poor’s 500

By Jonathan S. Reiskin, Associate News Editor   

This story appears in the June 25 print edition of Transport Topics.

Trucking stocks may not have boomed over the past 12 months, but on average, their improvement has outpaced other transportation equities and the stock market as a whole.

In a recent check of stock prices, the Standard & Poor’s 500 Index added just 2.78% during the 52 weeks ended June 6, while over the same period, S&P’s index of nine trucking companies gained 7.53% but the Dow Jones transportation index lost 1.43%.

In general, stock prices have been falling since early April, wiping out gains made in the year’s first quarter. At best, the U.S. economy has grown slowly, but not enough to ease fears that European financial woes might swamp the slender national recovery. As for the realm of trucking, though, business looks sturdy and durable.

“Freight’s pretty steady, although it’s slow growth,” said David Ross, who follows trucking for Stifel, Nicolaus & Co. “Europe does not have a huge influence on trucking. It has little to do with what Wal-Mart is shipping through its distribution centers.”

Ross added, “From the freight perspective, things are OK. We are optimistic buyers of trucking stocks.”

Domestic manufacturing and industry have been rising steadily since the bottom of the recession. The Federal Reserve’s index of industrial production has been rising slowly but consistently since June 2009.

“Freight-hauling capacity continues to be constrained, which is a positive for the industry, and diesel prices are coming down, which also helps,” said Donald Broughton of Avondale Partners. He said the industry faces a number of significant challenges, but there is “a lot of opportunity out there” for fleet managers who can hurdle the barriers.

“The economy and operating environment is pretty much as forecasted and continues to move in a northerly direction, albeit in a slow and sometimes choppy pace,” said Henry Gerkens, chairman and CEO of Landstar System, Jacksonville, Fla., in a May 29 mid-quarter update for his company.

The flatbed sector is doing better than average for now, Gerkens said.

“From a revenue-per-load standpoint, average flatbed pricing remains very strong, as capacity continues to be tight in that portion of our business,” he said.

The stock price for Landstar, which ranks No. 8 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, gained 21.5% from June 8, 2011, through June 6.

Some typical stars of the transportation world did not fare well during the test period. Eastern U.S. railroads CSX Corp. and Norfolk Southern Corp. saw their share prices decline by 71.8% and 7.1%, respectively, although Canadian Pacific and Kansas City Southern posted price gains in excess of 20% each.

Lower shipping volumes of coal have affected railroad performance, said several analysts interviewed for this story. Through June 2, year-to-date carloads of coal shipped decreased 8.55%, year-over-year at BNSF Railway, which is part of Berkshire Hathaway. At Union Pacific, through June 2, carloads of coal shipped declined 13%, year-over-year. CSX Transportation, through June 2, saw its carloads of coal shipped down 17.5% over the same period last year. And Norfolk Southern’s carloads of coal in the first quarter of 2012 were down 11.6%, year-over-year, while Kansas City Southern’s carloads of coal in the first quarter of 2012 were down 11.3%, year-over-year.

Non-asset-based logistics providers, often touted as a superior model to fleets owning trucks, posted some noticeable price declines, including: C.H. Robinson Worldwide Inc., Eden Prairie, Minn., down 23.9%; Expeditors International of Washington, down 18.5%; and UTi Worldwide Inc., Long Beach, Calif., down 22%.

Looking at Robinson, Broughton said intermediaries are not doing as well now because the supply of trucks is tight, shipping volumes are rising — slowly — and the number of freight brokers is rising, with many trucking companies offering brokerage as an additional service.

A number of trucking companies did better, such as truckload carrier Celadon Group, up 25.6%; intermodal specialist J.B. Hunt Transport Services, up 27.8%; and less-than-truckload carrier Old Dominion Freight Line, up 24.1%.

Celadon, Indianapolis, ranks No. 42 on the TT for-hire list; J.B. Hunt, Lowell, Ark., is No. 5 and ODFL, Thomasville, N.C., is No. 18.

In its first-quarter earnings report released on April 24, Robinson said, “Through April 23, our North American truckload-volume growth per business day was approximately 10%. Through the same period, our total net revenue growth per business day [gross revenue less purchased transportation costs] was approximately 1%.” While the freight broker’s business volume has been rising, trucking companies working with Robinson have been getting a bigger cut, on average.

Robinson, Expeditors, CSX and Norfolk Southern are all members of the Dow’s transportation average, which tracks a total of 20 companies.

Among other major indexes, the Dow Jones industrial average gained 3.04% during the 52 weeks ended June 6, the Nasdaq Composite Index grew by 6.33%, while the Dow Jones trucking subindex lost 4.39%. Those changes refer to the index levels and do not include dividend payments.

In its first-quarter earnings report, released April 18, truckload carrier Werner Enterprises offered an assessment of trucking: “We continue to believe that favorable truckload demand trends are caused to a greater degree by supply-side constraints limiting truckload capacity, as compared to growing demand generated by increased economic activity.”

Furthermore, the Werner report said, the cost of a new truck is about 30% more than one purchased four years ago, and there are safety and regulatory challenges to operation. Despite those challenges, the Omaha, Neb.-based carrier, which ranks No. 11 on the TT for-hire list, has posted nine consecutive quarters of year-over-year profit growth of more than 20%. During the test period, though, Werner’s share dipped by 0.3%.

Trucking share prices could well continue to grow through the year, said Jeffrey Kauffman, who follows transportation for Sterne, Agee & Leach.

“The environment is good now for asset-based providers,” Kauffman said. “On the macroeconomic level, there is a sell-off of stocks due to the euro crisis, but it’s different when you’re looking at trucking from the bottom up.”

While Kauffman described tonnage growth as “anemic,” diesel prices have declined from higher levels earlier this year, and “carriers have been careful in adding capacity” — and that has allowed freight rates to grow.

“Despite all of the global fears, the outlook is not as bad for trucking. It’s not a question of ignoring the macro issues, but trucks are mainly domestic, except for going across the borders in Canada and Mexico,” Kauffman said. Given the current situation, Kauffman said he expects to see a traditional year-end rally for trucking stocks.

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Within trucking, Kauffman said, flatbed availability is very tight, but even dry vans — the largest segment — are enjoying good demand. Among less-than-truckload carriers, he said, those that made the biggest percentage gains were those that suffered a year ago. In particular, Con-way and other LTLs that tried to put the final nail in YRC’s coffin last year did very poorly then, but now they’ve come back. This means they closed the gap with perpetual profit leader Old Dominion Freight Line. ODFL did not gain as much now because it didn’t fare poorly last year.

Avondale’s Broughton, who has followed the relationship between diesel prices and trucking failures, is now looking keenly at the ability of trucking managements to master regulatory challenges. In particular, he mentioned the federal Compliance, Safety, Accountability program and electronic onboard recorders, or EOBRs.

“If you have a newer fleet, no leverage and you made the transition to EOBRs, you’re in the catbird seat. But EOBRs are like Tommy John surgery for pitchers. Once you’ve gone through it and done the rehab, it’s fine. But the actual process is not fun,” Broughton said.

As a whole, he expects trucking earnings to increase, year-over-year, through next year.

Stifel’s Ross said his firm anticipates a stable environment for trucking.

“If volume growth is flat or up, that’s good for trucking. You’d worry if you see a long string of negative numbers on tonnage. But right now, inventories are lean and there’s no sign of businesses destocking their shelves, so we anticipate slow growth,” Ross said.

“Everything’s OK, but there’s nothing too exciting.”

Shippers, Fleets Seek Competitive Edge by Tailoring More Services to Customers

By Richard Knee, Special to Transport Topics

This story appears in the June 4 print edition of Transport Topics.

APL Logistics, based in Scottsdale, Ariz., ranks No. 15 on the Transport Topics Top 50 list of the largest logistics companies in the United States, Canada and Mexico.

Many shippers and receivers don’t do enough homework when choosing service providers, said Jeffrey Tucker, chief executive officer of Tucker Co. Worldwide Inc., a domestic and international logistics and freight broker based in Cherry Hill, N.J.

“Neither carriers nor non-asset-based service providers are created equal,” Tucker said. “Unfortunately, we have rarely met a corporate procurement department that hasn’t thought otherwise.

“U.S. corporations, especially publicly traded ones, must better understand who and what existing and potential business partners actually are, and what skills and services they provide,” he said.

“The typical corporation has a [key performance indicator] or other mandate to send out [requests for proposals] regularly,” Tucker said.

“The process is rushed, haphazard, and starts behind schedule. Little research, dialogue or mutual understanding is present between parties. It’s a typical ‘git ’er done’ exercise in futility.”

He explained: “To illustrate just how extreme the differences are between providers, consider this: Our firm rejects — refuses to use — nearly 70% of motor carriers who wish to haul freight for our customers, based on contract details, insurance, compliance data or safety data. That’s before we even talk price.

“Yet to nearly every professional procurement department, they’d see the same potential suitors as essentially equal and want to see where the pricing fleshed out,” Tucker said.

QualifiedCarriers.com, a Web-based service enabling shippers and receivers to monitor truckers’ compliance with U.S. Department of Transportation safety regulations, “states that nearly 10% of the motor carriers entered into its system . . . are not, in fact, carriers at all. This is valuable news to the shipper,” Tucker said.

“Companies must use procurement departments only after professional transportation and logistics departments do a solid job of evaluating service providers more thoroughly,” he said. “Providers should be screened for insurance limits, basic DOT compliance data, safety rating for motor carriers and the current — not potential — ability to comply with all of the shipper’s corporate governance.”

“Shippers would be well-served to ask what the broker’s minimum

fitness-for-use standards are when selecting a carrier. Written industry model contracts exist and should be used between either shipper [and] carrier or shipper [and] broker — two very different contracts,” Tucker said. “Transportation departments — the folks who must live with the procured services — must know precisely which existing providers and potential ones meet the requirements, and exclude those who don’t.”

Tucker said he recommends using brokers and carriers that belong to trade associations, such as TIA and American Trucking Associations, which promote high ethical, regulatory and contractual standards.

Shippers and receivers also should check references and talk with businesses within their own industry.

IWLA, TIA and NITL all offer best-practices guidelines for their members. NITL’s guidelines are the product of a cooperative effort with ATA and are being updated, Gatti said, adding that the new edition should be available by this summer.

Relations between truckers and 3PLs are mostly cordial, notwithstanding whatever competition exists between them, execs on both sides of the coin said. Back-soliciting by one another’s customers rarely occurs, they said.

“We value our relationship” with third-party logistics providers, Muessig said. “We are seeking strategic relationships with 3PLs instead of transactional ones. We’ve got to create value for all three,” he said, referring to the shipper or receiver, the intermediary and Pitt Ohio. “We would never back-solicit them.”

Trucking companies must be prepared to decide which 3PLs will and will not be a good fit toward creating value for all the parties, Muessig said.

“We have seen carriers back-solicit intermediaries, but it usually hurts them in the long run,” said APL’s Howland. “Not only will that player not use them, going forward, [but] it tends to be a tighter group of players than one would think, and word gets around fast on any carrier who isn’t trustworthy. They also tend to have very long memories.”

Chip Smith, chief operating officer of Bay and Bay Transportation a provider of transportation and logistics services in Rosemount, Minn., agreed.

“Carriers rarely back-solicit a broker or 3PL. Every carrier needs help from a broker to get their equipment loaded from time to time,” Smith said.

“Carriers would have a difficult time finding a broker or 3PL willing to work with them if they had a reputation for back-soliciting customers,” Smith said.

“Brokers and 3PLs enter into agreements with shippers to handle a specific volume of freight. They may utilize hundreds of carriers to serve a single shipper because the carriers may have only sporadic availability for those shipments,” he added.

“Shippers do not have the time to deal with multitudes of carriers only as they are available,” said Smith, a member of the TIA board of directors. “They want predictable capacity and quality service. It is the brokers’ [or] 3PL’s job to provide this, regardless of how many or which carriers they use to get the job done.

“Carriers may not have enough consistent capacity to serve a shipper, and a broker may be their only way to access a given shipper’s freight,” Smith said. “Brokers [and] 3PLs also offer modal options and can bundle services.”

Pitt Ohio recently announced that it has added an express service that will make deliveries in two to three business days from mid-Atlantic and Midwest service areas to urban centers in California, Arizona and Nevada. Also, Miami-based Ryder System Inc. said it would provide warehouse management and last-mile delivery services for ColdTech Commercial, a commercial refrigeration manufacturer based in Findlay, Ohio (5-14, p. 16).

Shippers, Fleets Seek Competitive Edge by Tailoring More Services to Customers

By Richard Knee, Special to Transport Topics

This story appears in the June 4 print edition of Transport Topics.

When shippers search for the right carrier to transport their goods, price is often just one of their considerations, according to industry experts and trucking executives. Equally important, they say, is a fleet’s ability to provide services such as warehouse management, just-in -time delivery and the use of third-party logistics operations, among others.

“Some shippers have an outside logistics person in their warehouse. That’s a big change in the transportation function from what it was 10 or 20 years ago,” said Peter Gatti, executive vice president of the National Industrial Transportation League, Arlington, Va. “You see the [package-delivery companies] operating as [logistics] functionaries within the customers’ facilities.”

A big advantage in using 3PLs is their combined, multi-customer volumes give them transportation pricing leverage, Gatti said.

Chris Burroughs, a spokesman for the Transportation Intermediaries Association, Alexandria, Va., cited another reason for using 3PLs: “Access to equipment fleets that [carriers] might not otherwise have the time and resources to find themselves. With thousands of fleets to draw from, a good broker can provide more equipment and different modes of transportation much faster than a single carrier.”

He also said, “Efficiency and costs are the criteria you look at when choosing a 3PL — the quality of service and the cost of that service.”

Specific services that best suit a shipper “can vary with the supply chain that you have,” Burroughs said. Whether a shipper or receiver requires just-in-time delivery or uses a warehouse can be a major factor, he added.

Carriers also said that whatever services shippers require should be tailored to the needs of both parties and provide some degree of predictability for customers and fleets.

“Never develop a price and service solution until you clearly understand what the customer needs. Ask customers directly, ‘How often would you like to see us?’ ” said Geoff Muessig, chief marketing officer and executive vice president of Pitt Ohio, which ranks No. 65 on the Transport Topics Top 100 list of for-hire carriers in the United States and Canada.

“A lot depends on where you are in the sales cycle,” Muessig said. “If something has changed with [the customer] or if something has changed with us, it’s time to sit down and have a conversation” about those changes.

Tailoring a transportation or logistics service package isn’t always easy because forecasting cargo flow is difficult for some shippers, especially in the agricultural sector.

“The volatility of our supply is really interesting,” said John Pandol, director of special projects for Pandol Bros., a Delano, Calif.-based grower of table grapes and stone fruits. Predictability, of course, would make life easier, but “Mother Nature just doesn’t work that way,” he said.

About 90% of Pandol Bros.’ volume “is contracted by the buy side through third parties or the transportation division of a supermarket,” he said. For the remaining 10%, the company deals mostly on the spot market with refrigerated truck brokers, he said.

Pandol Bros. has one “fairly stable” account involving a forward distributor that holds product for delivery to its own customers, who want “daily deliveries of fairly small amounts,” Pandol said.

The same is true when picking a warehouse/distribution center operator.

“To the degree they overlap — warehouses with trucking operations and trucking companies with warehouse operations — I would imagine there is little difference in what their customers generally consider as criteria for picking any such supplier: experience, expertise and capabilities, and cost,” said David Sparkman, a spokesman for the International Warehouse Logistics Association, Alexandria, Va.

Dave Howland, vice president of land transport services for APL Logistics, said his company “will always attempt to work with the customer to provide the direction that will give the customer the best value for its transportation spend. That is why we offer management services [that can include things such as ironing garments] as well as the underlying transportation service with truck, rail, ocean and air. The underlying service can come from us or our competitors, depending on the shippers’ needs.”

Continued in our 6/8/2012 blog.

Load-Board Scammer Gets 10-Year Sentence and Must Repay $443,000 to Fleets, Brokers

By Eric Miller, Staff Reporter

This story appears in the April 16 print edition of Transport Topics.

Kulwant Singh Gill has been sentenced to nearly 11 years in federal prison for defrauding dozens of motor carriers and brokers out of nearly $500,000.

Gill, 53, who was originally named in a federal indictment in 2006 for a series of northern-California-based load-board double-brokering scams, received the sentence last month after he pleaded guilty to two indictments in 2009 that included continuing fraud schemes in 2007 while free on $200,000 bond.

This is believed to be the longest prison sentence ever imposed for a freight load-board scammer. Last year, a California scammer was sentenced to four years in prison and his two sons to five years for defrauding 165 people of more than $1 million.

Although his indictments date back nearly six years, Gill has been able to avoid being sent to prison due to unspecified “myriad medical conditions,” court records said.

“Rather than ceasing his criminal activity after his indictment in 2006, the defendant reopened his company under another name and continued to defraud victims while on pretrial release and while suffering the same medical conditions that purportedly make him unable to endure a lengthy prison sentence,” according to a 2008 federal indictment.

Gill operated his load-board scam for an estimated five years before a U.S. Department of Transportation Inspector General’s Office special agent caught up with him in 2006, according to court documents. At that time, Gill already had a record that included convictions for felony check fraud and false insurance claims, said the agent’s affidavit.

“The defendant’s record shows that he is a serial fraudster whose previous contacts with the justice system have been insufficient to promote respect for the law or to deter further criminal activity,” the 2008 indictment said.

In addition to the 10-year, 10-month sentence, a federal judge also ordered Gill to pay $443,000 in restitution to his victims.

Doug Moscrip, co-owner of the load board Internet Truckstop, said Gill’s activities were largely the reason he began beefing up his own website’s security.

At the time Gill committed his frauds, Moscrip was issuing numerous alerts to truckers and brokers warning them of his activities.

“He was one of the ones that really got us into security,” Moscrip told Transport Topics. “For a long time we had difficulty getting law enforcement interested in him.”

Internet Truckstop now has four employees who handle security for the website and requires a company with an account to pay in advance for freight loads, he said.

“Before that, we would just bill them,” Moscrip said. “That made it easier for crooks, because we’d sometimes go 60 days before we’d collect.”

Gill made a handsome profit in the scams he pulled off, primarily looting motor carriers and brokers who failed to perform their due diligence checking his credential and background, according to court records.

“The investigator out of San Francisco who went after him was just amazed at what he got away with,” Moscrip said.

Indeed, Gill pioneered many of the techniques that were later copied by other load-board thieves, Moscrip said.

At the time, Gill capitalized on a vulnerability of the Federal Motor Carrier Safety Administration’s carrier registration website, logging into legitimate motor carrier number listings but changing the phone numbers and addresses.

“The way the FMCSA’s website was set up at the time, it was pretty simple to do,” Moscrip said. FMCSA said that since then, the website security has been improved.

Gill’s overhead was relatively low. He’d rent an apartment, set up a computer and fax machine, and use a prepaid cell phone to do business. Sometimes he’d rent a mailbox and use it as a business address.

Using several different aliases, Gill would contract for a freight load with a shipper or broker using a legitimate or fake company name, get a payment for fuel in advance, relist the shipment on a load board, but never pay the trucker who actually picked it up and made the delivery.

Ken Lowry, owner of now-defunct Desert Jewell Logistics Inc., a small carrier based in Glendale, Ariz., was one of dozens of unsuspecting truckers who hauled loads for Gill — but never got paid.

Lowry’s small trucking company was cheated out of $6,700 to pick up a load for Gill in San Pedro, Calif.

“I’ve been taken six or seven times since then,” Lowry said. I wasn’t as careful as I should have been. I never got a dime of it back.”

Visit the Transport Topics website for more articles.

The new office allows for additional support services to our plant, produce and foodstuff business coming in through the Miami gateway.  The additional Florida regional location will provide back-office services to Interstate’s locations across the U.S.  Opening regional support offices has allowed us to cover additional hours in order to expand our second- and third-shift operation capabilities.

Gay Seward, the Operations Manager for the Melbourne office, said, “As Interstate grows, it is important that we focus on true 24-hour operational excellence whether a client or driver calls at 11 a.m. or 11 p.m.  This office will help to provide the kind of operational support that bolsters our existing first‑, second- and third-shift service, as well as to provide an additional Interstate office on the east coast of Florida.”

Opening regional offices in the Southeast U.S. has been a goal of ours for quite some time.  We started our expansion in that area with our Georgia office and now have a total of four locations in the Southeast.  Our plans include opening more regional centers throughout the country, as we did in Colorado and Missouri.  We base our expansion model on providing as much personal service as possible to our customers, and that means placing our team members in strategic locations so that we can provide the highest level of service.  Our management team carefully selects each new site and we only move forward after analyzing which location will be of the greatest value to our customers.  We look forward to announcing our plans for further expansion and diversification in upcoming posts.  I predict 2012 will turn out to be a groundbreaking year for Interstate Transport.  You can find out more about the Interstate Logistics Group family of companies at our website.

The Food Shippers of America conference focuses on education and offers some of the country’s leading experts in trucking, logistics, produce, food safety, distribution, and consumer trends.  Our core business is time-sensitive transportation and we look forward each year to meeting with colleagues and clients in the industry who attend this conference.  It’s a great opportunity to catch up on how our customers and suppliers are leading their companies through the economic uncertainties we all face and how they are adapting to the increasing amount of legislation that regulates our businesses.  Moreover, it is a great conference to truly connect to our clients and to make sure our future service offerings hit the mark on every level.

Education sessions fill the 2012 conference agenda and this year’s line-up offers a diverse range of subjects.  Session topics include best practices for disaster planning, food safety, oil prices and their effect on the industry, and consumer behavior analysis.

Attendees can visit Interstate Transport at the Breakfast Break Station on Monday, February 27, at 10:00 a.m.  We’ll see you there!

This type of freight comes with heavy seasonal demand and experts with the knowledge and experience to handle the most delicate and time-sensitive types of goods.  That’s where we shine.

Another way in which we’ve positioned our business to have longevity in the industry is by diversifying. We offer a full suite of logistics and transportation services, a specialized trucking division, and a Transportation Management System that we designed in-house and have developed and refined over the years. By offering more than just the basic truckload service, our customers can turn to us for any type of transportation need, knowing that we have the solution.

Read the Stifel Nicolaus industry update excerpt below for their truck brokerage forecast.

Truck brokerage approaches saturation.

Over the past 10 years or so many carriers have started brokerage divisions and many stand-alone brokerages have grown rapidly. With brokers reliant primarily on capital starved, smaller, technology-challenged, and regulatory challenged carriers for capacity and with many large carriers reluctant to share their margins with brokers, it follows that the truckload brokerage space could soon reach the point where too many brokers are chasing too little freight to be hauled by a dwindling capacity set.

Given this landscape, we see the brokerage industry consolidating…around large, well capitalized, well systematized brokers. We further see the broker function becoming increasingly automated and less labor intensive. Lastly, we believe that to prosper, brokers must become de facto outsourced transportation and logistics departments for their customers instead of simply truckload capacity providers. Brokers will have more staying power with their customers if they can offer network optimization services, intermodal services, less-than-truckload services, customs brokerage services, international ocean and airfreight forwarding services, warehousing/distribution services, et cetera, in addition to their legacy truckload services.

One brokerage niche that may survive unscathed is the temperature-controlled truckload brokerage sector where demand is highly seasonal and regionalized, the capacity sector is highly fragmented, and service requirements are high…

Follow the link to read more of the industry update.

Each year, Food Logistics editors recognize 100 software and technology providers that enable grocery and foodservice distributors and manufacturers to meet and exceed their business goals.  The 2011 list focuses on solution providers that help their customers differentiate themselves in the marketplace, while simultaneously facilitating improved safety and traceability throughout the supply chain.

Interstate Transport is proud to add the 2011 Food Logistics honor to its growing list of awards.  Inc. Magazine has named us one of the Fastest-Growing Logistics & Transportation Companies nationwide and Inbound Logistics Magazine selected Interstate Transport’s InMotion Global TMS^® for its list of Top 100 Logistics IT Providers.  Our innovative solutions and services allow our clients to lower their transportation costs and improve their customer service performance. 

Lara L. Sowinski, editor-in-chief at Food Logistics said, “With the passage of the FDA’s landmark Food Safety and Modernization Act, the entire food and beverage sector is under increased pressure to improve safety and traceability throughout the supply chain.  In addition, the ongoing globalization of food supply chains demands closer collaboration with suppliers and enhanced visibility from farm to fork,” notes.  “Technology is a powerful tool that can ensure compliance, mitigate risk, and serve as a market differentiator in today’s highly competitive environment.”

Receiving this recognition year after year from Food Logistics Magazine is a testament to our team here at Interstate.  As an industry leader in transportation services, technology solutions, and best practices, our TMS provides the agility and simplicity of implementation that companies demand to manage the most complex shipping operations.  InMotion Global TMS^® is intuitive and customizable which saves users time, and increases accuracy and efficiency.  Everyone is focused on the bottom line right now, and Interstate provides the capacity its customers need at the most competitive prices in the market and utilizes the latest trends in transportation and logistical technology to help our customers reach their goals.  Congratulations to the entire team; you deserve this award!

Our model has been to grow organically and through opening new company offices or acquisition.  Opening the Miami center is the next step in a strategic plan to offer more personal service to every region of the U.S.  Like the centers we opened in Georgia, Colorado and Missouri earlier this year, the new Miami center will offer a focused approach to regional customer service, primarily working with temperature-controlled freight.

The center, which is situated to allow for future growth, will interface with our plant, produce and foodstuff importers through the Miami gateway.  The goal is to provide seamless delivery to all points across the country from air and ocean transfers with complete, online load tracking and cold chain integrity.  The Miami center staff is bilingual, offering customer service in both English and Spanish.  They will also work very closely with our existing horticultural shippers in the South Florida area to provide integrated customer service.

2011 has been a phenomenal year for Interstate in terms of investing in people, new offices, customer-centric technology solutions, expanding our existing asset fleet, and most importantly, in terms of choosing close partner clients that need committed solutions from an extremely dedicated service provider.  Our goal is to listen to our customers and to provide the real-world solutions they need to manage their most complex freight and logistics challenges.  In response to our customers’ needs, we’ve continued to diversify and strengthen our presence in the most dynamic, nationwide markets and to execute a strategy of intelligent growth and expansion.  Our new Miami center is just one step in that plan which includes even more expected growth announcements in the near future.

Interstate Transport, named one of the Fastest Growing Logistics & Transportation Companies by Inc. Magazine, has opened two new company-owned and operated Sales & Dispatch Centers.  The centers, located in Colorado and Missouri, opened simultaneously last month, adding to the company’s current regional locations in Florida and Georgia.

Tim Higham, President and CEO of Interstate Transport said, “The key to our amazing growth is that we listen intently to our customers.  When they need experts who are ready to respond and provide regional solutions on the spot, we’ll open a Sales & Dispatch Center nearby to meet their defined needs in that particular region.  We want our customers to know that we are more than just a vendor, we are truly a partner and we’re willing to commit the resources and technology necessary to help them succeed.  Our success only comes from their success.”

Geographical diversity has meant that Interstate’s trucks are moving efficiently which results in the best possible rates and on-time service for its customers.  Its regional Sales & Dispatch Centers have ensured the customers’ freight continues to be loaded in locations that are in the most need of capacity.  By adding additional Sales & Dispatch Centers, Interstate is building specific expertise in temperature-controlled freight, specialized flatbed, and produce in those regions and assisting customers who face challenges keeping up with seasonal demands.

Higham added, “We are constantly investing in the growth of our companies and we anticipate future announcements before the end of the year and into 2012 regarding other Sales & Dispatch Centers that are currently in development.  It’s a tribute to our team here at Interstate that we can continue to expand during such trying economic times.  The reason for our staggering success is that our business is focused on building relationships with and providing complex solutions for – our customers, our drivers, our carriers, and our vendors.  Opening regional Sales & Dispatch Centers makes sense because we have found that having our logistics experts close to our customers makes it easier to meet their needs quickly and efficiently.”

The company’s Transportation Management System, InMotion Global TMS, unifies Interstate’s diverse offices.  The system offers online, real-time tracking and tracing for customers and a complete suite of tools that allow employees to work efficiently and provide quick and responsive service.

Follow The Leaders

Food Logistics Magazine
July/August 2011

For the sixth year in a row, Food Logistics has identified the leading third-party logistics and cold storage providers to the food industry. These service providers are helping food companies optimize their warehousing and transportation operations and offer a broad scope of services and capabilities that enable companies to reduce costs, increase flexibility and improve service levels.

Find out what types of services they’re offering to help you better manage your supply chain. This year, we added 15 companies to the list, for a total of 100 service providers. Our editorial team selected these companies based on the information supplied on their submission forms, as well as through research, talking with industry analysts and reader input.

All 3PLs provided a food customer reference list, which has been kept confidential.

Congratulations to those companies named to this year’s list!

Read the story at the Food Logistics website.

Generally speaking, you have four options when moving your material to your customer locations. The first three of these options are relatively common – and 99% of shippers fall into one of these three categories.

First, you can buy your own trucks (and I include leasing or renting trucks in this category). Second, you can outsource the entire job to a third party (a third-party logistics provider, 3PL or broker). Third, you can try to manage a combination of trucking companies, brokers, and your own fleet. Each of these solutions work for many – but another option exists that is gaining rapid traction: Dedicated Contract Carriage. With Dedicated Contract Carriage you get the benefits of owning and operating your own fleet, but without the headaches or cost.

Moreover, Dedicated Contract Carriage not only combines the benefits of owning your own fleet of trucks but it takes away the huge liability issues of running your own trucks, it transfers the operational headaches to the service provider (including driver hiring and retention), removes your responsibility of staying on top of ever-shifting governmental DOT regulations, and, in most cases, reduces your overall cost of distribution.

In a nutshell, Dedicated Contract Carriage gives you your own fleet, sans the operational headaches, for a flat rate per mile billed to you monthly for all miles that the trucks move. As long as you pay the mileage rate for every mile the truck runs (including empty miles), subject to a minimum per week or month, you get a turnkey trucking solution. You can even have your company’s name on the side of the trailer, smartly uniformed drivers, and be involved in every aspect of the day-to-day operations (or not, as the case may be).

For example, if today you have 10 trucks (tractors, trailers, drivers) on your books, you are responsible for monthly payments, maintenance, DOT regulations, insurance, driver hiring (and firing), maintaining a separate corporation (to mitigate liability), and perhaps hiring separate staff (to help keep up with backhauls). Basically, you are running a trucking company in order to service your customer base. However, with Dedicated Contract Carriage you turn over the entire operational activities of your trucks (and the liabilities) to a third party. The third party (usually a trucking company or 3PL) assumes all operating costs, maintenance, insurance, staffing – everything!

…continued on 6/17/11 post

As soon as an asset is used or geographically displaced, an asset player must become a broker in order to provide the best price and service.  So, an intelligent shipping program includes a mix of both asset players and intermediaries. Ultimately, you want the best price, service, and people; and leading intermediaries typically provide all three.  As in most industries, shippers find that outsourcing provides the simplest and least expensive route to realizing those savings.  By simplifying the fundamental elements of their businesses, shippers save money and are able to focus their time on the profitable aspects of their operations.  Rather than creating in-house transportation divisions, prudent distribution managers turn to third parties to provide logistical and transportation expertise.

A third-party logistics provider (3PL) generally will charge flat, per-project fees for such services as lane bids which are laborious and expensive, especially for companies without a dedicated transportation department.  During the lane bid process, the 3PL analyzes the shipper’s needs and sends requests to thousands of carriers for bids.  On average, shippers who spend $1 million in annual distribution costs can save 10% by outsourcing just this one project to an outside professional.

Traditionally, markets find equilibrium pretty fast, and capacity supply and demand work out their differences.  Today, however, the markets are not acting normally and certain institutional factors bring about unintended and adverse consequences.  Ocean freight is a great example.  Most large ocean carriers are government-owned, to varying degrees.  They have been bleeding money for years and there is no end in sight.  The governments continue to supply the necessary funds and, in turn, shippers have no incentive to change carriers.  The weak need to fail – only then will the market adjust.  In the meantime, companies should explore all avenues of cost-cutting to make it through this, and future, market downturns.

Advertising Your Legitimate Home Business – Method1:
If you need to get began rapidly with a free resource, consider one of many free blog sites out there. You can have a look at blogger.com or wordpress.org. Blogging is a nice beginning for anybody with a web based enterprise, and even if you are offline for that matter. It appears that everyone like blogs. They like the casual fashion, like they’re being talked to on a private level. Also, individuals love to have the ability to talk about the stuff you write. Just be sure that what you might be posting is relevant to your customer base.

Advertising Your Legitimate Home Business – Method 2:
Another strategy to promote your legitimate home-based business is to use social networking. Some social networking sites are: Facebook, MySpace, and Twitter, although there are numerous others out there. Advertising one these sites is quite straightforward and does not have a direct cost. Make certain to take the time to fill in all the profile particulars so your audience will get a good feel for who you are. Once you are signed up, just be sure to actively participating in discussions and commenting about your product. And don’t forget to advertise your web site!

Advertising Your Legitimate Home Business – Method 3:
Advertising your legitimate home business using article marketing is the last thought we will discuss today. Article marketing is mainly writing articles related to your enterprise, and posting them to article directories online. OK, perhaps there is just a little more to it. You should create unique content that mentions your keywords and use the writer’s box to link to your website. This advertising methodology can take more time than the other two, but with some extra work you can be getting focused site visitors to your web site in no time. Article marketing paints you as the professional in your subject to your readers and lends you credibility.

Advertising your legitimate home-based business isn’t that hard, it just takes a little bit of research and time. Using a blog, some social networking sites and a little article marketing are great ways to advertise your online or offline business, and get your name out there. But you may be thinking, ‘I don’t really have an enterprise to advertise yet.’

Any new home business you start must meet the following criteria:

CRITERIA 1: It’s essential to have the ability to learn the business completely and quickly.

CRITERIA 2: The business must be in high demand, be steady and sustainable.

CRITERIA 3: The business must be profitable.

One business that we know of that meets all of those standards is that of a freight broker. Surely you are asking, what’s a freight broker?

A freight broker is an individual or firm that serves as a liaison between a company that needs transport services and an authorized motor carrier. Freight brokers use their knowledge of the shipping industry and technological resources to help shippers and carriers accomplish their goals. A freight broker works to find out the wants of a shipper and connects that shipper with a service provider who is willing to move the items at an appropriate price.

Freight brokerage services are precious to both shippers and motor carriers. Many firms discover the services offered by freight brokers indispensable. Actually, some firms hire brokers to coordinate all of their delivery needs. For his or her efforts, freight brokers can earn wonderful commissions.

Let’s be up front, though. Being a freight broker has some serious drawbacks. To operate as a freight broker, you are required to acquire a license from the Federal Motor Carrier Safety Administration (FMCSA). In all situations, freight brokers are required to carry surety bonds as well. Up front expenses for freight brokers may be very high as well since dispatch software programs and subscriptions must be purchased.

So, despite the fact that being a freight broker could be an exciting way for you to generate profits, as you can understand, it’s not easy to get started. Now, you’re most likely saying to yourself, ‘why tell me about this great business simply to pull the rug from under my feet’? Well…