All signs point to yes.

For starters, intermodal loadings have shown year-over-year gains for the past 25 months.  Of course it isn’t at the heights it reached in 2006, but this mode is racing ahead.  And, a host of industry factors will continue to fuel growth for, some say, the next three to five years.

We all know truck capacity is tightening as the supply of drivers and equipment struggles to keep pace with rising freight volumes.  Factor in changes to hours of service (HOS) rules and the FMSCA’s Compliance, Safety and Accountability program (CSA), and the over-the-road market gets tighter yet.  Of course decreasing capacity means increasing rates, so shippers begin to seek alternative solutions.

In years past, many shippers could not look beyond the highway to see intermodal on the horizon.  Intermodal service was questionable and rail infrastructure was weak.  Few shippers want to compromise their customer service to save money.  But today, shippers don’t have to compromise.

According to the Association of American Railroads, in recent years railroads have spent approximately $12 billion per year on tracks, signals and other infrastructure.  And last year, they invested more than $20 billion.  All of this was done in an effort “to grow and modernize the national rail network.”  According to many shippers, rail service is more reliable than ever.

And the trucking companies are right there, too.  It’s been more than two decades since J.B. Hunt and Sante Fe (now BNSF Railway) formed an unprecedented alliance that led the intermodal movement, and today truckload carriers are embracing this mode at a fervent pace.  Recently, we’ve seen a number of carriers adding intermodal capabilities to their offerings.

And why wouldn’t they?  They, like the rest of us, are here to serve the shippers.  Shippers are looking to secure capacity when the market is tight, and remain fiscally responsible as carrier rates and diesel fuel costs rise.  I haven’t even mentioned the environmental factor: Companies want and need to be in the black, but they want to be green, too. Add these requirements together and intermodal quickly equates to a “no brainer” for many manufacturers and retailers.

I am excited by the role intermodal will play in the coming years and I believe this mode is poised for significant growth – all signs point to it.

Late last month the Department of Transportation announced a final rule banning commercial truck and bus drivers from using handheld cell phones while operating their vehicles.  The rule, which was issued by the Federal Motor Carrier Safety Administration (FMCSA) and the Pipeline and Hazardous Materials Safety Administration, takes effect on the first day of the New Year. It is part of the DOT’s ongoing
mission to end distracted driving.

As you may recall, back in October the FMCSA banned texting by interstate commercial drivers. But, it wasn’t enough. Research demonstrates that, when using handheld cell phones, drivers remove their eyes from the road for an extended amount of time. They could be reaching for a phone or dialing a number – whatever it may be, it cannot happen behind the wheel of a large vehicle that is barreling down the highway at 65 to 75 miles an hour.

Enter the new ban.

However, the issuing entities understand the link between communication and commerce. Drivers can use hands-free phones, two-way radios, etc., but there will be restrictions. A few of our clients have asked for clarification regarding the ban, so we’ve compiled the following summary.

Who does it apply to?

• Interstate commercial truck and bus drivers
• All hazmat drivers

What does it ban, allow?

• It bans drivers from using handheld cell phones while operating a commercial truck or bus.
• Handheld phone use is banned while operating on a highway, including when a truck is temporarily stopped on the road. It does not include stopping on the side of the road.
• Drivers can use hands-free mobile telephones with a speaker phone option and one-touch dialing. These are allowable as long as the device is within the driver’s reach while he or she is in the normal seated position with the seat belt fastened.
• Drivers can use a handheld phone to contact law enforcement or emergency services for certain purposes, i.e. reporting an accident or a drunk driver.
• Two-way radios, or walkie-talkies, can be used for short periods of time when communication is critical for utility providers, school bus operators, or specialty haulers.

What are the penalties?

• Federal civil penalties of up to $2,750 for each offense.
• Multiple offenses disqualify drivers from operating a commercial motor vehicle.
• Commercial truck and bus companies that allow drivers to use handheld cell phones while driving face a penalty of up to $11,000.

What kind of impact will the new ban have on the New Year and beyond? Only time will tell. What are your thoughts?

Our country’s economic foundation is shaky at best, but truck carriers are raising rates and standing firm on pricing. As we’ve experienced – not too long ago – in times of economic uncertainty freight volumes usually fall and rates drop as desperate carriers vie for business. But, this is not the case.

First of all, volumes are rising. In fact, on Wednesday the DOT announced that its freight transportation services index rose 4.4% year over year in September and reached its highest level in more than three years. All reports and analyses point to the fact that capacity is tightening; however, we must realize that this happens a lot faster now. Over the last few years many trucking companies have gone out of business and those remaining are struggling to put qualified drivers behind steering wheels. What’s more, carriers are hesitant to add capacity to their existing fleets.

According to a survey by Transport Capital Partners, 73 percent of carriers said they did not plan to add capacity over the next year or they were only planning to add 5 percent at the most. Can we blame them? Carrier operating costs are increasing, and the economic climate is cool and its forecast is unpredictable.

Mode wise, these conditions do not discriminate; both less-than-truckload (LTL) and truckload (TL) companies have raised their rates and, according to many analysts, they will do so again.

Less-than-truckload:

Between July and September, several major LTL carriers rolled out General Rate Increases (GRIs):

• FedEx Freight – 6.75% effective 9/6
• Old Dominion Freight Line – 4.9% effective 9/6
• YRC Worldwide – 6.9% effective 8/1
• UPS Freight – 6.9% effective 8/1
• Conway Freight – 6.9% effective 8/1
• ABF Freight System – 6.9% effective 7/25

I think the title of Tuesdays’ Journal of Commerce article says it all – “LTL Rates Rising, But So Are Costs.” Labor, healthcare and material costs are rising and carriers need to recoup these expenses to ensure their survival. They are also trying to make up for recent years when industry conditions were not in their favor.

Truckload:

According to Transcore, September truckload pricing increased – average dry van spot market rates rose 2.3 percent compared to August and 3.9 percent compared to 2010. And in a recent survey, the firm found truckload carriers increased their pricing by 10 percent in the first half of the year. And it’s not just rates that will drive pricing up; Transport Capital Partners found more than two-thirds of truckload carriers plan to increase the use of accessorial charges.

Not great news for shippers, I know. But we can take solace in the fact that carriers are doing what they need to do to keep pace with rising costs and promote their sustainability, which will mitigate further tightening in the long term. Meanwhile, we will adjust – as we always do. In this business, there’s no such thing as business as usual.

Last week republican leaders of the House Transportation and Infrastructure Committee sent President Obama a strongly worded letter urging the White House not to change the current HOS rules, which have been in place since 2004 and are due for a revision on October 28.

There are many ways the final version could take shape, but most concerns center on the possibility of reducing drivers’ on-the-road time, which could include cutting drive time from 11 to 10 hours a day. Those in favor of changes cite safety concerns; those opposed cite the financial impact on our industry and the American economy at large.

Safety First

While many of my colleagues and I oppose a reduction in hours, we certainly are not adverse to safer highways and roads. I traverse our country’s roadways, as do my loved ones. However, data does not suggest the current rules compromise safety; in fact, since the current rules were put in place, our country has achieved unprecedented safety levels.

The American Trucking Association (ATA) says that since 2004
the truck-involved fatality rate has dropped by 36 percent – nearly twice as fast as the overall highway fatality rate. And here are the facts from the National Highway Traffic Safety Administration (NHTSA) and the Federal Highway Administration (FHA):

• Last year the U.S. traffic fatality rate fell to 1.09 per 100 million vehicle miles traveled – a new low in recorded history.
• It is estimated that in 2010 32,788 people were killed on U.S. roads – the fewest since 1949.
• The number of people killed in large truck crashes dropped 26 percent in 2009. The number of injuries in those accidents also dropped 26 percent.

The Cost of Change

Financially speaking, changes to the HOS rules are likely to result in less productivity for drivers and trucking companies, as well as additional administrative costs. These, of course, will translate into higher consumer costs. Upon assessing pending regulations, the White House said the proposed revisions could cost $1 billion.

Based on our current economic conditions, can we really afford to sustain such an impact?

Then there’s the traffic congestion and the impact on the environment. If daily driving hours are reduced, trucking companies would have to put more trucks and more drivers on the road just to deliver the same amount of freight. And won’t more traffic increase the likelihood of roadway accidents?

What Now?

The Federal Motor Carrier Safety Administration (FMCSA) has been working on rule revisions for the past two years and the late October deadline looms large. The FMCSA hasn’t said that it will reduce the number of hours, but many see this as a real possibility considering the amount of pressure applied by groups like Public Citizen and the Teamsters union. These organizations have taken FMCSA to court time and time again until 2009 when the agency agreed to revisit the HOS rule.

Regardless of whether changes are made or not, the FMSCA is likely to get sued again – either by the ATA or Public Citizen – and it will probably be a while before the HOS debate is settled. Meanwhile, all of this back and forth is costing everyone time and money. In my opinion, it’s like tinkering with the assembly of a perfectly good bicycle. You know what they say: If it ain’t broke. . .

Clicking through the interactive maps and reading the dire warnings to East Coast residents makes following Hurricane Irene both fascinating and frightening. Based on the facts, figures and projections, Irene has the potential to be a historical storm that could severely impact the entire East Coast.

Over the last couple of days we’ve received messages from our carrier partners – transportation companies keeping us informed of the storm’s progress. Today, these updates are arriving at a more intense frequency as carriers share details of their contingency plans and news of hub closures. There’s a general message in all of these updates: carriers are doing everything they can to keep freight moving while keeping employee safety a priority.

So what can shippers do?

• Allow as much lead time as possible for all shipments, especially those heading to the East Coast.
• Keep abreast of the storm’s progress and understand how it may affect your freight operations. Work closely with your transportation planners.
• Be flexible. Carriers are prepared to adjust delivery routes, reposition people and equipment, adjust hours of operation and consolidate loads bound for affected areas. As one carrier told us, do not expect “business as usual.”
• If and when a delivery delay is expected, contact your customers and keep them informed of the situation.
• Cooperate as much as possible with carriers. A storm of this magnitude compromises the safety of their staffs and the resilience of their businesses. Your understanding and flexibility will go a long way in regards to your current and long-term relationships with carriers.

Most importantly, stay safe. Remember, business is business but your safety and the safety of others is paramount. If you live in the affected areas, don’t shrug off the warnings; make a plan. Be proactive, be safe.

Estes Express just announced it will raise less-than-truckload (LTL) rates by an average of 6.9 percent. They are the latest in a line of LTL carriers who are trying to keep pace with rising costs by implementing a general rate increase (GRI).

Identical 6.9 percent increases took effect on Monday, August 1, for LTL carriers UPS Freight, YRC Worldwide and Con-Way Freight. ABF Freight System’s 6.9 percent increase took effect a little earlier – July 25. Estes Express’ increase kicks in on August 8.

These GRIs only apply to non-contract freight, which is a small percentage of cargo hauled by carriers. However, the increases come into play during contract talks and ultimately raise pricing for most shippers.

In a letter to customers, Paul J. Dugent, vice president of pricing for Estes Express, echoed the sentiments of his fellow competitors who raised their rates before him.

“Equipment costs have skyrocketed in 2011, spurred by higher prices for raw materials such as metal, lubricants and rubber,” Dugent said.

It reminds me of a quote I read in a recent article in Logistics Management magazine. Lana Batts, a partner at Transport Capital Partners said, “Carriers today are not interested in adding capacity, because rates today are about equal to what they were in 2006. The price of a truck has gone up from $80,000 to $120,000 and fuel is up, too. Everything is more expensive, and the industry is still charging 2006 rates. It is not sustainable. Trucking is not as easy of a business to get into as it was before.”

Industry consultants contend that the increases are a good thing; LTL carriers need to become more profitable. We know what happens when carriers don’t make money – they close their doors. Fewer carriers lead to less capacity and less capacity leads to significant rate increases.

To a shipper’s ears, these GRI announcements are a bit painful. But I believe it’s important to address the issue now rather than down the road when the stakes, and GRIs, could be higher.

Why should running a country be any different?

Right now congress is wrangling with the debt ceiling in the shadow of a looming deadline: August 2.  The U.S. has reached its debt ceiling and if it’s not raised, we could find ourselves in a potentially catastrophic economic crisis.  Not raising the ceiling means
our country would default on loans, in other words, not pay our bills.  And what happens when you don’t pay your bills?  Your credit rating suffers and your interest rates rise.

While congress fervently debates over what needs to be done to raise the ceiling, let’s look at the next basic principle of fiscal success: investing.  Obama is hoping for a “grand bargain” that he believes could save up to $4 trillion over the next decade through various tactics like spending cuts, Medicare and Medicaid reform and tax increases for Americans earning more than $250,000 annually.

In a press conference on Monday, Obama said that such a deal could pave the way for investments, including an infrastructure bank to fund transportation projects.  Being in the transportation industry, we understand the importance of such an investment.  And while both parties are looking to make budget cuts, Obama remains firm on his stance to increase funding in this sector.  I applaud this.

Last week House Republicans proposed a six-year, $230 billion highway-funding transportation package, which would cut current funding and is a stark contrast to the $556 billion the White House is looking to slate for highway projects. (See story)  In fact, the American Society of Civil Engineers says over the next decade the U.S. needs to invest $1 trillion beyond current levels just to maintain and repair our existing infrastructure.

But it’s not about maintenance; it’s about growth, which leads us to the third principle.  Investments, such as transportation projects, increase jobs and stimulate the economy.

As Obama recently pointed out, the housing market bust left one million construction workers unemployed and America needs rebuilding.  And without maintaining and
advancing our infrastructure, how can we compete in global economy that is becoming
increasingly competitive?

I realize raising the debt ceiling and managing the national budget are complicated issues that entail too many nuances to address in a single blog.  However, I believe revisiting the
basics can help us as we navigate complex issues.  Pay. Invest. Grow.

What do you think?

But how are you getting to your oasis – are you driving? If you’re hitting the road, you won’t have to take as much cash as you may have expected, but more than you did last year.

On a national average, gas prices fell 11.1 cents to $3.849 this week.  It’s the second straight decline and the lowest level we’ve reached in five weeks.  Last Memorial Day weekend, however, gasoline averaged less than $3 a gallon.

One thing that I appreciate about Memorial Day weekend is that it puts fuel prices in headlines, regardless of whether they are up or down.  Being in the transportation industry, fuel prices are always making headlines.  However, this holiday weekend gives everyone pause and turns our attention to fuel projections for the upcoming summer
months.

So what can we expect?  Last month the U.S. Energy Information Administration (EIA) released the April 2011 Short-Term Energy and Summer Fuels Outlook that includes detailed forecasts for the summer months, which it defines at April through September).

If you want to dig into the details, and you’re a fan of graphs, check the EIA’s presentation.  Otherwise, here’s the CliffNotes version:

Average diesel fuel price projected for Summer 2011 = $4.09 (vs. $2.98 last year)

Average gasoline prices projected for Summer 2011 = $3.86 (vs. $2.76 last year)

Based on consumption, growth, disruption of the Libyan oil supply and overall unrest in the Middle East and North Africa regions, the EIA expects oil prices to average about $110
per barrel compared to last summer’s per barrel cost of $77.

However this Memorial Day weekend, high fuel prices are not keeping Americans tethered to their backyards.  According to AAA, 34.9 million Americans will travel 50 miles or more from home this weekend.  Compared to last year, this represents an increase of .2 percent  – or 100,000 travelers – when compared to the 34.8 million people who traveled during the 2010 Memorial Day weekend.

If you are one of the 34.9 million Americans, I wish you safe travels.  And, if you’re anxious to start your journey, go ahead a leave a little early today.  (I won’t tell).

Diesel fuel is rising and truck capacity is tightening. We send industry stats and updates to our clients on a regular basis, and I have found that many people are surprised by what’s happening in the marketplace.  And once they’ve grasped the situation, the big question surfaces: What can we do about it?

But first, here’s a quick overview of what is happening in the marketplace: 

Diesel rises

According to the Department of Energy (DOE), diesel is averaging $4.078/gallon nationwide.  This is the first time the national average has reached $4/gallon since 2008 and prices are expected to remain over $4/gallon this summer.  At this point, the DOE estimates diesel to average $3.98/gallon this year, versus the $2.99/gallon average we saw in 2010. 

However, the predicted average increases on a regular basis as oil prices continue to climb.  Between mid-February and April alone, oil has risen from $85 to $112 a barrel.

Capacity closes in

Here’s some good news – the economy seems to be improving as freight volumes are increasing.  However, we are still experiencing reverberations from the recession when many trucking companies went bankrupt or did not invest in additional equipment.  Now, to put it very simply, we have more freight and less trucks.

We are seeing an uptick in all modes, including intermodal, but truckload is the frontrunner.  According to the Longbow Research Truckload Barometer, which measures available freight against available equipment and climbs as capacity contracts, truckload is up 46% year-over-year.  What’s more remarkable is that the barometer has risen 47.4% since January.

Less-than-truckload (LTL) capacity is tightening, too.  Stifel Nicolaus research firm predicts 2-3% growth this year however, this is likely to rise as truckload tightens further and more shippers look to LTL.

Capacity seems to be the tightest in the southeast where resources have become limited.  The produce season is here and many carriers have said they are not getting enough inbound freight to counteract their outbound activity.  According to TransCore data, the southeast has an average of 5.7 or more loads for every available truck. 

And now the big question:

What can shippers do?

Go intermodal

By switching modes (truck to intermodal or truck to railcar), you can mitigate the effects of both rising diesel fuel costs and tightening truck capacity.  Rail is also a less expensive mode of transportation and is more environmentally friendly, too. 

Optimize, optimize, optimize

One of the most popular and basic forms of freight optimization is LTL consolidation – combining LTL freight into less costly TL movements.  However, with TL capacity shrinking, this may not be the best option for you.  Instead, you can create less costly routes by stringing multiple TL moves into continuous routes with multiple stops.  This reduces deadhead charges and, better yet, creates carrier friendly routes.  As capacity tightens carriers can afford to pick and choose business.

Share with others

It’s about sharing resources when resources are limited.  Long before capacity concerns emerged, we launched a cross-shipper collaboration program that proves especially beneficial in times like these.  We leverage our diverse client base of high volume shippers to create optimized ship plans.  For example, we can combine TL shipments – from different clients – into continuous move tours.  If you work with a 3PL that does this, ensure they have the technology to safely match compatible freight and the ability to keep your freight data confidential.

Be carrier friendly

As I mentioned before, carriers can afford to be choosey so aim to have the business they want.  In addition to creating carrier-friendly routes (continuous moves), work with them at the dock level by expand your shipping and receiving hours, loading quickly and dropping trailers when possible.  And don’t forget the financial side – create and adhere to reasonable payment terms for all of your carriers.

Plan ahead

The last piece of advice simple but not always feasible: Book your shipments as early as possible.  Ideally, TL lead times should be 3-5 days (or more) to give you the breathing room you need to ensure coverage.

The logistics industry is no different and this week LMS expanded its options.

On Monday, we acquired McCann’s Piggyback Consolidated, Inc., which is an Intermodal Marketing Company (IMC) based out of Fenton, Mo. By buying this IMC, we now have access to all Class 1 railroads. This gives LMS more opportunities for growth but more importantly, it gives our clients more modal options.

Read the headlines of a few transportation magazines and a few things become clear: diesel fuel costs are on the rise, truck capacity is tightening and shippers are seeking greener solutions. So, shippers need options. Enter intermodal.

Intermodal combines truck and rail transport to reduce costs, reduce greenhouse gas emissions and take freight off the road. In fact, a double-stacked train is equal to 280 trucks. And, rail is three times more fuel efficient than its over-the-road counterpart. The American Association of Railroads estimates that if an additional 10 percent of truck volume were shifted to intermodal, the annual savings would reach one billion gallons of fuel.

Sounds like a good option to me.

To bring the intermodal option into focus, we are combining our freight brokerage operations (Dedicated Services) with the McCann’s acquisition to form a new company, Freight Management Solutions (FMS). Dedicated Services and McCann’s staff members will now operate as the FMS team. These logisticians will work with clients to help them choose the option that is best for their freight needs.

You’ll be hearing more about FMS in the near future. And, I guarantee you’ll be hearing more about intermodal benefits as market conditions change and evolve. Just remember, you’ve got options.

Chemicals are part of our everyday lives and every day LMS helps chemical companies move product through the supply chain. As you can imagine, moving this class of freight entails adhering to a litany of government and client regulations and requires specialized training for our transportation planners. As a non-asset-based 3PL, we don’t own trucks or hire truck drivers, but we can make a difference when it comes to helping to ensure the safe transport of chemicals.

I can tell you that LMS is committed to protecting people, property, and the environment and, as guardians of the supply chain, we are committed to monitoring and managing safety and security in all aspects of supply chain operations. But as the adage goes, actions speak louder than words. That’s why in 2005 LMS became a Responsible Care® Partner of the American Chemistry Council (ACC). And, as part of the partnership program, LMS implemented the Responsible Care Management System® and recently received third party certification to the RCMS (see the news release).

What is Responsible Care? Formally speaking, it is a global initiative where chemical companies, and their supply chain partners, share a commitment to advance the safe and secure management of chemical products and processes. Responsible Care is the tool that LMS uses to effectively establish objectives and processes that deliver the results that our clients expect and the public deserves.

So what does this really mean for LMS? As a Responsible Care Partner, we go far beyond what is required of a 3PL that manages chemical transport. We measure and report our Environmental, Health, Safety and Security (EHS&S) performance to the ACC and follow the RCMS, which is a rigorous means of continuously improving our performance in seven areas: community awareness and emergency response; security; distribution; employee health and safety; pollution prevention; process safety and product stewardship.

In addition to human health and the environment, the Responsible Care program addresses the security concerns of a post-9/11 world. In 2001 the ACC adopted the Responsible Care security code that has been recognized by federal and local government agencies and has been used as a model security program for other trade associations. The code helps ensure the protection of people, products and property.

But there’s more. As a by-product of implementing the RCMS program, LMS and its clients benefit from continuously improved operations. The RCMS is based on effective and proven management practices and embraces a plan-do-check-act philosophy. This means we are constantly checking our performance and finding ways to operate as safely and efficiently as possible. And as any business professional knows, efficiency = time and cost savings.

The benefits are immeasurable, which is why we are proud to be a Responsible Care Partner of the ACC. At LMS, we realize we play a vital role in the chemical supply chain. In fact, maybe we should change our slogan: “We do not make the chemicals you transport. We help make the transport of chemicals safer.”

As you know,  CSA 2010 entails the Safety Measurement System (SMS) which will replace SafeStat; CSA 2010 is slated to roll out nationally 12/12/2010.  However, on Tuesday, the National Association of Small Trucking Companies, the National Association of Small Trucking Companies, The Expedite Alliance of North America and the Air & Expedited Motor Carriers Association, asked a federal appeals court to block the implementation of CSA 2010 or, at the very least, to stay the publication of its safety ratings until the FMCSA completes a rulemaking process that complies with the Administrative Procedure Act (APA) (see story).  Unlike the current SafeStat program, the SMS impacts a carrier’s safety rating and assigns safety scores to carriers and drivers.  Moreover, SMS data would become available to the public.

It is difficult to dispute the FMCSA’s bolstered efforts – who doesn’t want safer roadways?  We need to ensure carriers and drivers are capable of safely traversing our highways, suburban streets and side roads.  But the accuracy of the data itself is in dispute.  And some believe that publishing this data will wreak havoc on a struggling industry.

CSA 2010 features a BASIC scoring system (Behavior Analysis Safety Improvement Categories) and uses the following seven categories to calculate safety scores:

- Unsafe Driving (i.e. speeding, improper lane change)
- Fatigued Driving (i.e. Hours-Of-Service violations, crash reports)
- Driver Fitness (i.e. lack of training, medical issues)
- Controlled Substances, Alcohol (i.e. misuse of medication)
- Vehicle Maintenance (i.e. mechanical defects)
- Cargo-Related (i.e. spilled cargo, unsecured loads)
- Crash Indicator (i.e. patterns of crash involvement)

But what are the formulas used to develop these scores?  Perhaps more importantly, is the playing field level?  For example, some states just need “probable cause” to charge a moving violation and carriers that are required to maintain driving logs will be compared with those that are not required to do so.  Most logging violations involve recordkeeping errors, not excess driving time.  Will data be deceiving?  And if data needs to be corrected, can carriers and drivers rely on a fair and satisfactory process?

The filing associations contend that the public release of data will have an anticompetitive effect on the industry.  Additionally, shippers and brokers may be liable for “negligent selection” of a motor freight provider as public data easily becomes evidence in a trial.  CSA 2010 may also result in a driver exodus.  Some predict a 10 percent decrease in truck drivers as CSA 2010 data renders some operators unemployable.  And as we know, less drivers means tighter capacity.

The filed motion states, “While the public undoubtedly has an interest in safe highways, it also has an interest in a competitive motor carrier industry, especially in these economic times.  A program that decreases competition, reduces jobs, and increases transportation costs, is not in the public interest.  Implementation of CSA 2010 in its current form threatens the survival of thousands of carriers, many of which are small companies in rural America.”

The associations say they want the FMSCA to comply with the APA which entails notice-and-comment provisions that would allow interested parties to comment on the proposal before final rule.  The FMSCA did invite comments on its proposal, and made modifications accordingly (see story), but it did not provide full disclosure regarding all aspects of the proposed rule, namely, aspects surrounding the data.

This is a difficult issue to navigate.  As transportation industry professionals, and drivers and passengers, we need to do all we can to ensure safe roads. But how will CSA 2010 affect our industry and our economy?  What are your thoughts?

This new acronym stands for driving while distracted (DWD) and it refers to behaviors that can be just as deadly as driving under the influence of alcohol or drugs. For more background, check out my previous blog Driving While Distracted. The reason I am returning to this topic is because this week Ray LaHood, U.S. Transportation Secretary, said that the federal government is looking to ban text messaging and limit the use of mobile devices by drivers hauling hazardous materials. See the full story.

As non-asset-based 3PL, LMS caters to companies that ship hazardous materials; more than half of our business comes from chemical companies. As such, our transportation planners are required to be hazmat trained and certified. We are also a partner of the American Chemistry Council’s Responsible Care program, which entails a comprehensive system for safety and security management. We understand the impact chemicals can have on people and the environment and although we do not haul the materials ourselves, we have a responsibility to help ensure the safe transport of these fragile shipments.

Numerous accidents can be linked to drivers who were distracted by cell phone use. According to the DOT’s distracted driving Web site, using a cell phone while driving, regardless of whether it’s hand-held or hands-free, delays a driver’s reaction as much as having a blood alcohol concentration of .08 percent – the legal limit. Any respectable truck driver would never haul freight while under the influence of drugs or alcohol, yet countless drivers are engaging in equally harmful activities. Imagine a driver hauling chemical shipments while drunk; the potential consequences are unimaginable.

The proposed hazmat regulation supplements a rule the Federal Motor Carrier Safety Administration (FMCSA) published on Tuesday that bans texting by interstate commercial drivers; it takes effect on Oct. 21. But the FMCSA does not have jurisdiction over hazmat drivers – these drivers are under the Pipeline and Hazardous Materials Safety Administration. This new proposal will ensure the no-texting rule applies to hazmat drivers as well.

As a 3PL owner, and a non-commercial driver who appreciates safe roadways, I continue to support the government’s efforts to fight distracted driving. I encourage everyone to add DWD to their transportation vernacular and remember: a DWD can be just as hazardous as a DUI or DWI. Drive safely.

Just this week, Mexico announced its plan to apply import tariffs to even more U.S. products (see full story)  Not so coincidentally, this move comes as President Obama signed a $600 million bill to increase Mexican border security and add customs officers at ports of entry.

This is Mexico’s second round of retaliatory tariffs.  As you may recall, Mexico began applying tariffs last year when the Obama administration and Congress halted a pilot cross-border trucking program that allowed select Mexican carriers to travel beyond the 20-mile border commercial zone.  The tariffs affected a wide-range of U.S. goods and carried a $2.5 billion value. 

The newly revised and expanded list entails 99 U.S. products and affects 43 states, versus the 40 affected in 2009.  However, Mexico says the total export value will be similar to that of last year ($2.5 billion).  Regardless, the message is clear – our southern neighbors are losing patience with us. 

Under the North American Free Trade Agreement (NAFTA), the U.S. was to allow Mexican – and Canadian – trucks full access to U.S. highways by January 2000.  Ten years later, only our northern neighbors have access.  Last March, the U.S. shut down the cross-border pilot program with Mexico while vowing to make a new and improved program a priority.  However, we are still waiting for a program (or even a proposal).

Mexico has set out to fiscally punish us, but they too are suffering.  According to Mexico’s economy minister, Bruno Ferrari, the dispute has caused an 81% decrease in U.S. imports affected by the tariffs (see full story).  Of course we cannot estimate the degree to which the recession impacts financial statistics, but Mexico’s overall imports fell $234.39 billion from 2009 to 2008.

Why are we not allowing Mexican trucks to traverse our highways?  Much of the debate centers on safety.  Many feel Mexican trucks and truck drivers could compromise our roadways.  In my opinion, this is a simple fix.  Should we swap safety for free trade?  Never.  So let’s spell out the requirements for trucks and drivers alike.  If a Mexican – or Canadian – carrier cannot meet our safety requirements, including hours of service (HOS) regulations, they should not have access to our highways.

I realize this situation isn’t as simple as it appears.  However, I also recognize the need for the U.S. to adhere to NAFTA and circumvent unnecessary tariff activity. The road to safe and free trade may be scattered with political potholes and lined with red tape, but I am hopeful that it will lead us to a place where everyone wins.

Enter the SmartWay Transport Partnership. It is the EPA’s collaboration initiative that enables the freight industry and the government to team up and reduce harmful emissions. The best part of this program is that it embraces the many players of the freight sector – truck and rail carriers, shippers, truck stops and yes, non-asset-based logistics companies.

As I mentioned, we don’t own trucks; we hire them. But we can help reduce greenhouse emissions by making smart hiring choices. Enter SmartWay carriers. Truck and rail providers become SmartWay partners when they commit to increasing fuel efficiency and reducing their impact on the environment. But it’s more than just talk. These carriers must set and strive for fuel efficiency goals within a three-year timeframe. Annually, they must complete a Freight Logistics Environmental and Energy Tracking (FLEET) Performance Model, to quantify the environmental performance of their operations. Based on the results, each carrier is assigned a SmartWay score – .75, 1.0 or 1.25.

There a number of different ways carriers can reduce their fuel usage. Most obviously, they can employ hybrid technology; less obviously, they can invest in wide-base tires, use low-viscosity lubricants and simply reduce their speed. In fact, SmartWay offers a number of carrier strategies for greener operations.

Some carriers may be greener than others, but all SmartWay carriers are working to lessen their impact on the environment. (Check out SmartWay Partners and their scores). As far as LMS, we are scored based on our use of SmartWay providers and the miles we spend with them. And, the greener the provider, the better our score.

As part of our partnership agreement, LMS must encourage carriers to join the program and increase our use of SmartWay carriers by at least 10 percent a year. Since joining the initiative in 2008, LMS has more than doubled its use of SmartWay carriers.

If you haven’t already, check out SmartWay. Whether you’re a shipper, a carrier or even a non-asset-based 3PL, you can work with us to reduce harmful emissions. Join today (all the smart companies are doing it).

But this week, I’m running into some headlines that no one likes to see, i.e. “US Manufacturing Growth Slows” “DOT Reports Downturn in Freight Index” and “New York Manufacturing Index Slips in July”

These headlines feed the fears of a double-dip recession, which some analysts, like Derek Hoffman, predicted. According to CNNMoney.com, Hoffman, the founder and editor of The Wall Street Cheat Sheet, originally gave the economy a 50-50 chance of double-dip activity.

But I am blogging to put those fears to rest. Try out these headlines: “Pulse of Commerce Index Falls, But Doesn’t Indicate Double-Dip Recession” and “Conference Board Sees US Growth Slowing: No signs of ‘double dip,’ says research group, expecting GDP of 1.5 to 2 percent.”

And as far as Hoffman, he too started to see the light. He now puts the odds of a double-dip recession at 20%.

We’ve enjoyed a fast, uphill climb and we’re slowing down a bit. Economic stimulus programs have run their course and many shippers have right-sized inventory levels, which means an economic slowdown should not be a surprise. I may not be a financial analyst, but I do not believe we are plunging to the depths of recession once again.

What do you think?

Last week I traveled to Atlanta for eyefortransport’s 8th Annual 3PL Summit and learned LMS had been named a “Best 3PL” for the fourth consecutive year. Yes, that’s four in a row, even better than a three-peat.

Our company has been fortunate to receive many awards, but this is one of my personal favorites. That’s because I know the judges; they are important to me and everyone at LMS. The judges are our customers.

Each year eyefortransport conducts an online poll where shippers are asked to vote for their favorite 3PL. Our employees can’t vote, my golf buddies can’t vote – it’s just for customers. And customers can write in any company they wish during an initial round of voting that determines the three providers that will vie for the “Best 3PL” title. A final round of voting determines which one wins. (Check out the official news release.)

Shippers not only voted for us once, but twice and this is true honor. If I had to thank “all those who made this possible,” my acceptance speech would entail a litany of client names. Long before I was finished, they’d have to cut to commercial.

But it’s not possible for me to list all of them here either, so let me say this: Thank you to all of our customers. We are grateful to have earned your business and we are proud to be your 3PL of choice. Our entire staff works tirelessly to ensure your safety, service and savings goals are met. Your trust in us makes our efforts worthwhile and we will continue to work hard to earn your vote next year, too.

Just eight months ago, I wrote a blog about shippers being in the driver’s seat (“Rates are Down . . .”). Capacity was loose, carriers were competitive and rates were low. But now, all that has changed.

Shippers: Welcome to the passenger’s seat.

You’ll see I’m sharing some industry stats, but I don’t need numbers to tell the story. Outside my door I can hear the outgoing and incoming phone calls as our staff members work with carriers to secure trucks for shippers. Like any formidable 3PL, we’ve got a substantial database of qualified carrier partners, but market conditions have led us to a time of tightened capacity and not-so-competitive rates.

According TransCore Trendlines, April’s year-over-year spot market loads have increased by 191% – more than quadruple the freight availability in 2009. At the same time, there was a 9.6% increase in year-over-year tonnage (see graph). As TransCore Trendlines observes, this may mean more freight is shifting to the spot market, compared to 2009, or that capacity is becoming constrained. Based on my experiences, I assume the latter. In regards to specific modes, May year-over-year load-to-truck ratios have spiked, especially in dry van (up 248%), reefer (312%) and most significantly, flatbed (657%).

And as capacity decreases, rates increase. I know of a major shipper who is raising their rates and is not looking to negotiate. As it is, they have more business than they can handle. Other carriers are beginning to pick and choose their business by customer, by freight classification and by lane. The improved economy has afforded carriers the opportunity to do business on their terms. But can we blame them? We must remember that carriers are trying to make a recession recovery.

Take some time to check out these graphs and we’ll try to keep you informed of market conditions in the coming weeks and months. Stay tuned . . . in the transportation industry, the only constant is change.

Imagine driving from St. Louis to Kansas City with four westbound lanes the entire way. Two lanes would be for smaller vehicles (cars, motorcycles, etc…) and two lanes would be for tractor-trailers. This would be an immense undertaking for the United States that some say is still very practical and should be done. Here are some reasons why:

Safety – Thousands of deaths occur each year on US highways. Separating heavy truck and smaller vehicle traffic would reduce highway fatalities.

Reduced Congestion – Less traffic, fewer accidents, and better drive times would be achieved. You could make it to Kansas City faster, safer, and with fewer four-letter words being shouted.

Self-Financing – To pay for these additional lanes, tolls would be charged to trucking companies. Depending on the design of the tolling system it is even possible to make these lanes profitable enough to attract private investment.

Lowered Transportation Costs – With tractor-trailer traffic segregated and the safety barriers in place it would be reasonable to allow the use of Longer Combination Vehicles (LCVs). A turnpike double for example, is a tractor hauling two 48’ trailers. This increased payload per driver/tractor would outweigh the tolls charged and increase carrier productivity. Near city limits breakdown yards would be located where these LCVs could be broken down to single trailer rigs so that pickups and deliveries could be made safely on city and county roads.

Lower Fuel Consumption – It is safe to say (without getting into a bunch of math) that hauling two 48’ trailers does increase the fuel consumption of an average tractor, but it does not double it. Overall fuel consumption would go down with fewer tractors hauling more trailers. This would lead to lower fuel costs for carriers and lower emissions for the environment.

Jobs – This huge undertaking, specifically the construction, would take years to complete. If you see that glass as half full, it means a large number of jobs which cannot be outsourced would be needed for a long time.

In the fourth quarter of 2007, the transportation marketplace feared there was a significant truck driver shortage that would grow exponentially as the economy expanded. At the time, there was an estimated 20,000 driver shortage in the long-haul segment of the domestic trucking industry. Due to economic growth, this shortage was expected to grow to a driver deficit of more than 100,000 by 2014 .

Fast forward to today and the capacity situation is once again a growing concern among shippers. Freight rates are returning to 2007 levels as freight tonnage is up 3-4% in the first quarter of 2010.

Truck driving is considered to be one of the most stressful occupations due to the unpredictability of home time and a pay scale that has declined over the past 10 years . Throughout the 1990s, trucking was considered a well-paying career. However, the trucking market decelerated in 2000 – 2001 (similar to 2008 and 2009) and driver pay has been slow to recover. Construction, manufacturing, and trucking draw from the same labor pool. Driver recruitment is challenging because trucking is often regarded as the most stressful of the three industries and yet transportation companies cannot compete in regards to pay.

The decline in the relative pay of the job, coupled with the perceived stress factor, resulted in significant turnover in 2007 and early 2008 and increased freight rates. However, when the credit market froze up in the latter half of 2008, the driver shortage quickly turned to a driver and equipment abundance – forcing many trucking companies to either shut their doors or at the least, rationalize their fleet. Freight rates declined in like, but have recently gained some momentum.

With unemployment near 10%, the issue today is not the pool of available drivers, rather it seems to be the ability (financing) or desire of trucking companies to secure additional equipment to add to the marketplace.

Freight volume in 2010 is up on a year-over-year basis and freight rates are returning to more palatable levels for the carrier community. The challenge for carriers is predicting the future. Shippers and industry experts are unable to come to a consensus as to the short-term demand for big industries such as automotive and residential construction. Although both of these industries have seen an increase in demand in the past six months, it is unsure whether this is organic or demand pulled forward by programs such as Cash for Clunkers and New Homebuyer Credits.

With such uncertainty, carriers that can secure financing are reluctant to do so, due to the unpredictability in the marketplace. This leaves everybody in a state of limbo. Like the stock markets of recent weeks, we can expect to see volatility of carrier rates continue to fluctuate until a more clear economic recovery pace is realized.