ADS Logistics Supply Chain Management Blog

A Perfect Storm is Churning on the Horizon of the Trucking Industry

The Department of Transportation (DOT) sent its proposed Hours of Service (HOS) changes to the Office of Management and Budget (OMB) Monday (7/26) to settle yet another challenge to the rules drivers and trucking companies must follow.

Meanwhile, Transport Topics reported this week that 20% of truckload fleets increased driver pay in the second quarter of 2010 citing Gordon Klemp, principal of the National Transportation Institute in Kansas City, MO.

Continuing difficulties in attracting new drivers, a situation that will only be exacerbated by expected reductions in work and driving hours contained in the proposed HOS regulations, are contributing to this perfect storm.

Any reduction in driver working and/or driving hours will further reduce already strained capacity and require more drivers and trucks to move the same amount of freight.

Flatbed carriers led trucking with more than 30% of such companies raising driver pay, while 20% of refrigerated carriers and 11% of dry van operators did so in the second quarter according to Klemp.  He also predicted significant increases in the third quarter.

With carrier margins already depressed as a result of market pressures during the recession, shippers can expect sizeable rate increases to fund these long overdue pay increases.

In a related story, transportation and logistics professionals predicted major changes and increased costs associated with any reductions in driver HOS.  Shippers claim they’ve already adjusted their operations as much as possible and any HOS changes would require them to reevaluate their supply chain.

Reduced HOS = reduced capacity = increased need for drivers = increased pay rates = increased freight rates = increased end user costs.

As the economy rebounds and freight levels increase the pressures on the supply chain will increase as well.  Shippers would be well advised to truly partner with shippers to tweak their operations and maximize driver/truck utilization.  The alternatives are even more expensive than rate increases.

The perfect storm is churning on the horizon.

Written by Kevin Mullen, Directory: Safety

When it Rains on the Supply Chain

Supply chains are designed for efficiency, predictable timing, low costs, and reliability.  A certain comfort level develops after years of working with vendors; lanes of service are honed and things seem to work with only a few wrinkles. Then it rains.  Rains like Hurricane Alex rained as it cut its path out of the Gulf and across Northern Mexico.  

Hurricane Alex hit land June 30th as a category 2 Hurricane with winds of 105 mph and began pouring its heavy rain as it began to move across Northern Mexico. The flooding was extensive in the Eastern states of Tamaulipas, Nuevo Leon and into Coahuila.  The subsequent flooding wreaked havoc on the railway and roads in many regions.  This area of Mexico holds many of the Maquiladora industries and is the gateway to much of the industry in Mexico and from there into the United States.  

Because of damage to rails and infrastructure caused by Alex, all of the railroads have embargoed rail crossing at Brownsville, TX; Laredo, TX and only and interchanges with the KCSM.  (They had embargoed crossing to the FXE at Eagle Pass but partially lifted that restriction on July 8th.)  The US railroads are sending crews and equipment to aid in the repairs but the damage is extensive. Cargo cars are backed-up and sidetracked far from the border and it will take several weeks to sort them out even after the crossings open again.  Transportation and Logistics departments are scrambling to find ways to deliver their freight through alternate routes (some limited road access is still available).  The railroads are working with customers to the extent they can, but when cars are blocked into yards with a hundreds of others, it can be hard to dig out a specific car for delivery.  

After a disaster every company evaluates their emergency plans, and asks themselves if it is adequate. Hurricane Alex has proven to be no exception. Needless to say, these past weeks have been busy times for us logisticians. It serves as a reminder that despite all the best spreadsheets, flow-plans, and lean manufacturing practices, sometimes it rains, a cautious reminder that optimum planning should always remember that nature doesn’t pay attention to our flow-plans.  

Written by Steve Klok, ADS Logistics.

Results of Early CSA 2010 Testing

The results from the early CSA 2010 testing opened quite a few eyes when the data first started to surface. The early reports showed that out of the 1,500 carriers who were tested; 69% of them will face some sort of federal intervention. Warning letters will be issued during the Fall and Winter of 2010. Roadside inspections will also start around the same time. All of this is in an attempt to lower the number of violations in future years.

To rate fleets, CSA 2010 will use 7 different criteria known as the BASICs. The 7 are:

• driver fitness
• unsafe driving
• fatigued driving
• controlled substance/alcohol
• crash indicator
• vehicle maintenance
• improper landing/cargo securing

The fleets are given a score based for each category and their score will determine whether or not intervention will occur. Out of the 1,500 carriers who were rated, 396 had one score above the intervention threshold, 288 had two, 163 had three, 76 had four, 34 had five, 9 had six, and 4 were above threshold in all seven. (more info at FleetOwner.com) The 4 that were over threshold in all seven of the BASIC categories were all in the Federal Motor Carrier Safety Administration’s (FMCSA) largest fleet. The FMCSA’s largest fleet contains carriers with a peer group rating of 500 power units or more. Drew Anderson, Director of Sales at Vigillo, (the risk management company that created the CSA 2010 scorecard) “I don’t believe that larger fleets are less safe. I think that statistic points out the inequity of [FMCSA’s] peer group rankings based only on the number of power units.” He continued, “I think once they introduce miles driven into the (rankings), the number of larger carriers (above the intervention thresholds) will go down.”

CSA 2010 compared to SafeStat

Under the current system, SafeStat, only 1.3 percent of the same 1,500 fleets will undergo intervention. That is only 20 fleets compared to the 1035 fleets that will require intervention within the CSA 2010’s standards. By Spring 2011, the CSA 2010 will be fully implemented which will impact over 750,000 companies. (additional details: TransportTopics.com). Although the CSA 2010 will not be in effect until the middle of next year, companies have been previewing their own data since April 12th and will continue to preview it until November 30th. (see the CSA 2010 Rough Timeline). The CSA 2010 was originally scheduled to take full effect in December 2010, but it was delayed so more data could be gathered. Once the full implementation is complete intervention will begin. The before-mentioned warning letters and road side inspections will be accompanied by on and off-site investigations, safety plans, and out-of-service orders.

Consequences of CSA 2010

    The actions brought about by the CSA 2010 should vastly decrease each fleets score and make for much safer driving. About 80 percent of all violations are “driver controlled” such as moving violations and improper vehicle maintenance. The tighter guidelines should bring down the number of violations altogether, but it will also decrease the number of driver-related infringements. Another surprising statistic that has come to light as the result of these early reports is that 53 percent of all speeding tickets result in a warning and not a citation. This is good news for drivers, however it makes it more difficult for the CSA to account for all moving violations. This could mean that there are possibly more infractions than are reported; a scary thought considering the already elevated scores some fleets were given by the CSA 2010.

5 Supply Chain Challenges of the Future

A recent study has found that B2B Companies, which comprise many of ADS Logistics Customers, will likely face 5 key supply chain challenges as they seek to take advantage of the economic recovery, according to a new study by PRTM Management Consultants.

The study, Lessons Learned from the Global Recession, (you have to fill out a form to read the full report so we did it for you) found that most of the 350 manufacturing and service companies surveyed now believe there will be a significant upturn in demand from their customer base over the next few years.

However, the study also warns that many companies lack the supply chain infrastructure critical for meeting the emerging demands of managing an increasingly complex global market.

The 5 emerging demands identified by the study are:

1. Supply chain volatility and uncertainty have permanently increased
: Market transparency and greater price sensitivity have led to lower customer loyalty. Product commoditization reduces true differentiation in the B2B environments, and companies need to respect this reality.

2. Securing growth requires truly global customer and supplier networks
: Future market growth depends on international customers and customized products. Expanding supply chain globalization and complexity need to be managed effectively. Thus, finding supply chain management companies with integrated services such as ADS Logistics will play an increasingly important role.

3. Market dynamics demand specialized, cost-optimized supply chain configurations: 
Customer requirements and competitors necessitate custom-tailored supply chains and product offerings.

4: Risk management involves the end-to-end supply chain: 
Risk and opportunity management should span the entire supply chain—from demand planning to expansion of manufacturing capacity—and should include the supply chains of key partners.

5. Existing supply chain organization are not truly integrated and empowered
: The supply chain organization needs to be treated as a single integrated process. To be effective, significant improvements require support across all supply chain functions.

More than 85 percent of companies expect the complexity of their supply chains to grow significantly by 2012, yet many did not strengthen critical capabilities during the Recession. Additionally, more than two-thirds expect a higher number of product variations will be required to fulfill local customer expectations. Having an integrated and reliable supply chain process will be critical.

The study concludes with a 5-Point Agenda for Chief Operating Officers over the next 2 years to help them strengthen their supply chain process:

1. Improve customer access to supply chain data
2. Increase upstream and downstream supply chain flexibility
3. Focus on total supply chain cost engineering
4. Implement end-to-end supply chain risk management
5. Integrate and empower the supply chain organization

Ultimately, the main challenge for many companies is not to redefine their organization models, but to transition and manage the organizational change. When it comes to the metals industry, a company like ADS Logistics is ahead of the curve by providing integrated services such as their online inventory management system. The next 20 years will be particularly insightful as winners and losers emerge across all industries in this new economy. 

Transportation Secretary's Trucking Comments Spark National Debate

Tom Madigan of the Transportation National Journal recently published a report on Transportation Secretary Ray LaHood and his comments concerning the White House's regard for the trucking industry. The comments have created quite a skirmish among the major players in commercial transportation and recently ADS Logistics was asked to weigh in on the issue. Our own Kevin Mullen will be publishing a response shortly, but to catch you up to speed here is Mr. Madigan's article:

Transportation Secretary Ray LaHood this month sought to calm a dust-up with trucking advocates, responding to their concerns that the department didn't value the role of trucks in the nation's freight system. "Truck transportation... will continue to play an essential role in ensuring the economic health of the country and maintaining the United States' position as a leader in international trade," LaHood wrote in a letter to Bill Graves, president and CEO of the American Trucking Associations.
Graves had written LaHood in April taking exception to public comments the secretary had made indicating trucks should take a lesser role in moving freight. One example Graves cited was the secretary's remark at a March meeting of the International Bridge, Tunnel and Turnpike Association that the "lion's share" of the department's $1.5 billion in TIGER funding "went into our freight system because it takes trucks off the road -- it takes gas-guzzling trucks off the road." Graves responded that it's not simply a matter of shifting the load to rail and waterways, and suggesting so "is not only factually incorrect, it can breed irresponsible policy."
The dust seems to have settled now. But what do you think about freight transportation and the future of trucking? Since trucks will make up a large portion of our freight mix for the foreseeable future -- Graves writes that trucks are projected to carry 71 percent of the nation's load in 2020 -- what's needed to make sure they're as efficient and clean as possible? Does this become a larger question about infrastructure? Are we using the best freight mix now, or is there a better one? What untapped possibilities do you see for rail and water transport?

Click here to read the full report, complete with opinions from leaders in the trucking industry.

Stay tuned for the official reaction from ADS Logistics!

Trucking Gives Reason to Hope for Economy Turnaround

A strong indicator of economic rebound has been reported for the month of May, giving hope to those who may be worried that the stock market's depressing behavior is a sign of a continued recession. Strangely enough, the report comes out of the trucking industry.

The Ceridian-UCLA Pulse of Commerce Index (PCI) jumped 3.1% in May, the largest monthly increase since February 1999. The index tracks credit-card purchases of diesel fuel at truck stops across the United States. and provides a real-time indication of how much freight is moving from ports and factories to consumers. In other words, the higher the PCI, the more products Americans are making and buying.

The jump in the PCI index coordinates nicely with similar increases in manufacturing, shipments, and retail sales, all of which have been rising steadily from mid-2009 lows. The only economic factors that remain stubbornly low are employment and retail inventories. However, even that can be a good sign for the economy, as it may signal that manufacturers and retailers are saving before adding employees and inventory to their overhead.

"The stock market is still dealing with the fear effects of 2008 -- investors are worried it will happen again," says Edward Leamer of UCLA. "This is actual transactions. This is truckers buying fuel."

The PCI is a traditionally jumpy index, falling 0.3% in April after strong increases in December, January and February. The year-over-year growth rate, annualized, was 44%. The strongest increases in fuel sales came in the Midwest, where companies like ADS Logistics have been running hauls across the country, resulting in a 6.1% increase in fuel purchases. Perhaps the most encouraging number however, is the year-over-year growth in the PCI, which has approached 10%, a level Leamer says is necessary to support enough economic growth to decrease unemployment.

The rising truck traffic indicates a GDP growth of 3% to 5% in the 2nd Quarter. Leamer says this by itself is not enough to make a big dent in unemployment, though many companies such as ADS Logistics are actively seeking to hire new truck drivers. Should the PCI hold steady,  the U.S. economy should return to its long-term GDP growth trend of 3% by 2013.

6,000 Americans Die Each Year From Driver Text Messaging

National Highway Traffic Safety Administration research shows nearly 6,000 people died in 2008 in crashes involving a distracted or inattentive driver, and more than 500,000 were injured.  This is a national crisis and a growing concern for transportation safety officials.

To put this into perspective… on any given day in 2008 nearly 1 million vehicles (800,000 to be precise) were being operated by someone using a hand-held cell phone.

A recent study by the Federal Motor Carrier Safety Administration found drivers who send and receive text messages take their eyes off the road an average of 4.6 seconds out of every 6 seconds while texting. At 55 MPH, a vehicle travels more than the length of a football field (371 feet to be precise) in 4.6 seconds.

The high number of fatalities and injuries are small wonder when considering these factors.  In fact, it’s hard to believe the numbers aren’t worse.  It is, in no uncertain terms, a national disaster but one which we all have the capacity to correct.

No text message, no telephone call is so important as to justify putting another human being at risk of injury or death.

Drive time is not the time to catch up with family or friends.

Drive time is not the time to catch up on voice mails or e-mails.

Drive time is not the time to touch base with a customer or make a sales call.

Drive time is definitely not the time to be texting or reading texts.

None of these tasks will seem even remotely sufficient to justify or rationalize a crash and injuries or deaths.  Certainly none of them will sway a jury should you face criminal charges as a result of a crash.

None of the excuses for performing these distracting behaviors behind the wheel will ever heel the pain if it is your loved one who is hurt or killed.

Stop!  Think!  Resolve not to drive distracted.  The reasons to drive distracted are hollow and the consequences are devastating and life changing.

Safety is no accident.  Safety is personal.  Safety is in your hands.

Posted by Kevin Mullen: Director- Saftey, ADS Logistics

On the Hunt for Marine Containers

The shortage of marine containers for export and domestic use has been a topic of concern for the last couple of years. This predated the economic collapse at the end of 2008, but it has been intensified by the recession.  The drastic reduction of imports in early 2009 brought far fewer containers into the country. In addition, many steamship lines canceled lanes and their frequency of service and moved many ships to anchor, often loaded with empty containers that were no longer needed.  These marine containers (20’, 40’ and 45’ containers) are a widely desired unit for international and domestic transport.

In the May 3rd article “Needed: More Boxes” from The Journal of Commerce, Peter Leach reports that in 2009 there were about 350,000 new containers manufactured, down from about 3 million in 2008.  He goes on to report that the Federal Maritime Commission is concerned about container availability as it tries to increase their export levels now that the economy is showing signs of recovery.  Many exporters are having difficulty obtaining containers, both standard and specialty models.  Exporters need these units in order to ship many common goods including grains, perishable goods, lumber, paper, and scrap metal.  

Michael Marley’s article “Where Have All the Containers Gone?” in the May issue of American Metal Market details the extreme difficulty many of the scrap metal dealers have been encountering.  When breakbulk ocean freight rates skyrocketed in 2006, many scrap metal dealers shifted to containers, and eventually came to prefer this method of shipping. Today there is more competition for these limited units, and many dealers are having difficulty obtaining the containers they need and booking the shipping lines they desire.

The shortage is felt because the shipping lines are enjoying a surge in demand for exports from the USA.  This continues to grow as the improvement in the economy that began in the second half of 2009 continues to grow.  Lines are putting previously idle vessels back into service and restoring old lanes.  With the increase in imports more containers are entering again, but not at a pace to fully satisfy demand.  Domestic transporters have to contend with the Marine Department's decision to make empty containers first available for exports.  Although there are some regions where container supply seems to be in surplus (namely New York and Memphis), in most major shipping points there is a supply shortage, particularly of the longer units.  

ADS Logistics Co, LLC, Western Intermodal division supports export shipping as well as operates a domestic transportation service.  We have been able to keep a steady supply of containers and equipment through our long-term relationships, cooperative repositioning of some equipment, private equipment, and constant attention. Transportation is a world of moving parts and the art is getting the parts to move where and when you need them.

Posted by Steve Klok, ADS Logistics.JR6DKH597WTN 

2 New Reports about the Supply Chain Industry

Two very interesting reports came out in the past few days...

Wednesday, The American Transportation Research Institute (ATRI) released an analysis of commercial vehicle crashes that found the majority (87%) occurred within the first eight (8) hours of driving. This is important in that it further discredits supposed highway safety groups such as CRASH, which have repeatedly sued the FMCSA over 2007 changes to the hours-of-service regulations permitting drivers one additional hour of driving time.  Only 12% of crashes occurred in the 9th to 11th driving hours. Prior to 2007 drivers were permitted to drive only 10 hours.

Coupled with measurable and historic decreases in truck-involved fatalities during the same period, it would behoove CRASH to focus on other behaviors (such as distracted driving) by passenger car drivers who, incidentally, cause anywhere from 50-70% of truck-involved crashes, according to studies by the FMCSA and AAA.
 
Lawsuits by CRASH and associated groups have cost millions of dollars that could well be better spent on other initiatives more likely to reduce crashes.

Additionally, in a recent Commercial Carrier Journal webinar, FTR Associates President Eric Starks released their Driver Supply Update for May.  FTR forecasts a 200,000 driver shortage by the end of 2011.  FTR cites a lack of hiring and training personnel due to carrier cut backs during the recession.  Anecdotally, we have sufficient hiring and training staff but are finding a shortage of qualified drivers.
 
The impact of CSA 2010 was not figured into FTR’s dire forecast, however it will only exacerbate the problem.  Starks’ assessment that “we could be 400,000 drivers short of what we need” with CSA 2010 driver defections spells trouble for already tightening capacity should signal shippers that rate decreases squeezed from carriers during the recession will be erased and reversed in the not-too-distant future.

Posted by Kevin Mullen, Director- Safety: ADS Logistics

Can You Prevent an Accident?

While searching for information as to why the most recent oil spill in the Gulf hasn’t yet been contained, I found an article that says warnings on system failures in deep sea drilling operations were evident as far back as 2000. Additionally it mentions that while drilling processes had advanced, safety technology stayed stagnate.

To think that preventive measures weren’t up to date on current drilling practices; which in turn now jeopardizes our environment, waters, birds, fish and so many other things, makes me angry and got me thinking… Can you prevent an oil spill or, in our case, can you prevent an accident or damage from occurring?

Preventive measures, when taken seriously, can save lives and dollars for both the company and its employees. Although our company has many preventive measures in place, we need to make sure they are up-to-date with our current practices and that the employees performing these procedures know the seriousness of their actions. In plain words, prevention needs to be effective. Here are the 2 biggest ways to prevent an accident:

• Pre-Trip Inspection and Equipment Inspection Sheets

Do you really know how important those mundane inspection sheets are? Employees who utilize these checklists should be looking at them like it was their first time. The drivers and warehouse employees who walk around trucks or equipment are the ones who will determine what does and does not work properly. Will you be able to detect the internal workings? It's doubtful, but a thorough check can certainly keep you safe, keep the truck or equipment running, save the company from having to pay for unnecessary costs, and save the operator from paying unnecessary fines.

• Safety Meetings

Another meeting….ugh! But not just another meeting, these meetings take place to keep you and every other employee safe, and ensure that everyone is aware of the requirements that are placed on our company. Within these meetings, hypothetical real-time situations may be discussed as well. For instance, we might review another company that has had warehousing problem and discussion takes place as to “what could we do to prevent that situation from happening here at ADS." Whatever the timing or topic is of our Safety Meetings (and/or ongoing safety training), each one is important and should be treated as such.

Each of us, as employees of ADS Logistics, should look for ways to prevent potential danger or damage. Although we are required, through our ISO certifications, to report and document preventive measures, we can all go above and beyond this responsibility to ensure that we all go home safely to our families each night knowing that our trucks and equipment will be waiting for us tomorrow.

Posted by Rose Cyphert: Billing- ADS Logistics

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