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3PLs offer shippers ‘untapped capacity’

3PLs offer shippers ‘untapped capacity’

As the second half of 2018 unfolds, shippers are presented with compounding challenges as the holiday season approaches. The truck driver shortage is showing no signs of loosening, lower tax rates have fueled consumer spending, and the tariffs imposed on Chinese goods are spurring manufacturers to stock up on imports in order to get ahead of the presumed price increases, all of which are driving truckload capacity constraints.

In the recent American Shipper article, “3PLs offer shippers ‘untapped capacity’”, Maggie Turner, National Account Manager at AFN, delves into the complexities of the market and shares insight on how shippers can successfully navigate this uncharted territory. Turner discusses how shippers have found new ways to make themselves a ‘shipper of choice’ and tap into available capacity by working with a trusted 3PL to gain access to smaller carriers.

Please read the article to find out more.

 

To learn how AFN can help you access untapped capacity, contact our supply chain professionals today.

7 Key Challenges for Shippers in 2017

We recently had the opportunity to speak with some of our customers regarding the key challenges they are facing in 2017. With the first quarter of the year already drawing to a close, we’d like to share their feedback and insights.Our shippers shared their top #challenges for 2017. Do yours make the list? #ELD #CapacityCrunch Click To Tweet

1. Driver Shortage and Capacity Crunch

Industry observers await progress on the Trump administration’s proposed trillion-dollar infrastructure investments. Historically, housing construction booms lure drivers from the cab to the job site. If a similar scenario unfolds in 2017, it could create significant shortages of drivers and a restriction on capacity. This perennial challenge remains top of mind and is potentially compounded by issue # 2.

2. Electronic Logging Device (ELD) Mandate

As Trump’s first 100 days as President draw to a close, the uncertainty regarding the future of the ELD mandate, if not its ultimate effects, is beginning to dissipate. According to a recent regulatory update: Regulation and Infrastructure After the 2016 Elections, presented by Logistics Management and NASSTRAC, the proposed ELD regulations are unlikely to be overturned in the near term. However, real questions remain as to the enforcement “teeth” in the regulations. While it appears the mandate will remain in place, it’s unclear how severely it will impact available capacity.

3. North American Free Trade Agreement (NAFTA)

Last year, trucks carried 62.5% of U.S.-NAFTA freight and continued to be the most heavily utilized mode for moving goods to and from both U.S.-NAFTA partners. Trucks accounted for $55 billion of the $88 billion of NAFTA imports and exports (U.S. DOT). With the Trump administration looking to rework or eliminate NAFTA (and potentially build a border wall), it could mean big changes for shippers with factories or suppliers across either border. Currently, carriers can obtain a bond and secure a FAST card to expedite trade across the border, including electronically submitting cargo information ahead of the crossing (U.S. Customs and Border Protection). Without these intracontinental agreements in place, shippers could face a significant roadblock at the border that would slow down distribution in spades. Additionally, eliminating or limiting NAFTA could result in a range of unintended consequences for the U.S., including reduced access to the U.S.’s biggest export markets, a reduction in economic growth, and increased prices for gasoline, cars, fruits, and vegetables (Bloomberg).

4. Food Safety Modernization Act (FSMA)

For shippers within the food and beverage industry, the Final Rule on the Sanitary Transportation of Human and Animal Food (STF Rule) of the FSMA takes effect very soon (April 6). These new safety standards are focused on keeping foods safe during transport from farm to table. The FSMA generally increases visibility into the origin and destination of foods as well as documenting the entire handling process. In addition to the increased regulation around manufacturing and transporting foods, the STF Rule will provide further safety standardization and visibility throughout the supply chain, including vehicle and transportation equipment, transportation operations, training, and records. For more information about what’s changing, read our recent blog post about the STF Rule.

5. Fuel Costs

Over the past few years, shippers have enjoyed the major decrease in fuel prices compared to mid-2014. However, in addition to a looming capacity shortage, the market has shown a slow but consistent increase in fuel prices over 2016, up 29% YoY for February (DAT TrendlinesTM).

6. Mergers and Acquisitions

Mergers and acquisitions have been a significant trend in recent years among 3PLs and carriers. Of course, M&A activity is not limited to the transportation and logistics space. We heard from customers that are working through the challenges of integrating corporate cultures, systems, and management teams in the wake of acquisitions. As they face challenges of their own, they look to lean on trusted partners more than ever.  

7. Retail Service Requirements

Walmart recently narrowed its on-time delivery (OTD) window from 4 days to 2 days and increased OTD requirements to 95%. To learn more about Walmart’s new compliance requirements, read our recent blog post.

What challenges and opportunities await you through the end of the year, and how can we help? Please contact AFN today to get the conversation started.

Driver Shortages: Any Solutions in Sight?

Yogi Berra famously said, “It ain’t over til it’s over”. As an industry, we’ve been experiencing shortages of qualified drivers for several years, even through the worst period of high unemployment in recent history. And, to paraphrase Yogi, it doesn’t look as if driver shortages will end anytime soon. In fact, the ATA (American Trucking Associations) estimates that the industry currently needs between 20,000 and 25,000 more for-hire truckload (TL) drivers than it has.

Driver Shortages: Any Solutions in Sight? Click To Tweet

The repercussions weaken all links in the transportation chain. As an industry, this issue impacts all of us, not just the livelihood of logistics companies such as AFN and the carriers and shippers that we serve. The driver shortage also affects the economy as a whole by driving up the cost of goods.

Solving the driver shortage problem is, however, a complex undertaking. Answers are about as clear as mud. Digging deeper into the many inter-related reasons that contribute to driver shortages makes you realize that few of them are entirely within the control of any one private or public entity, agency or other body.

Consider the following contributing factors to driver shortages:

– The lifestyle. According to data released by the ATA last December, the annualized linehaul driver turnover rate at large truckload fleets exceeded 100% for the second straight quarter, and the churn at smaller truckload carriers rose to a five-year high.

– Regulations. While we can debate the relative pros and cons of CSA and other rules, it’s clear that the pool of qualified drivers is shrinking.

– Demographics. There simply aren’t as many age-eligible new drivers getting their CDL licenses at age 21. Those that do may not be insurable until they turn 23 or 24. At the same time, drivers born during the baby boom era are rapidly retiring.

– Competition from other industries. For example, as the construction industry improves, the pool of drivers decreases proportionately.

As further illustration of the complexity of the issue, look at the connection between driver pay for linehaul drivers and traffic congestion. Most local drivers are paid hourly so traffic jams do not take a bite of their wallet. In contrast, linehaul drivers are paid based on mileage driven – they make the same amount of money whether driving one mile in a single hour in bumper-to-bumper conditions or traveling that same mile, at 65 miles per hour down a highway, in a single minute.

The paycheck pain congestion causes can be considerable. And depends, to some extent, on what routes the driver is assigned. Texas A&M Transportation Institute’s most recent urban mobility report ranked Washington D.C., Los Angeles, San Francisco, New York City, and Boston as the worst cities for regular traffic congestion but also reveals a broad swath of other congested metro areas. The Institute’s Planning Time Index (PTI) actually measures the time any vehicle (whether passenger car, bus, or truck) needs to add to so-called regular travel times due to congestion. Washington D.C. ranks first on the list with a PTI of 5.72, almost three hours designated for a half-hour trip.

Looking at congestion issues alone as an example, it’s clear why a “fix” is often elusive and can be costly. You can increase pay per mile or use an index such as the PTI to offset driver pain by paying drivers more in the more heavily congested traffic lanes. You can also switch drivers to hourly pay. Add night shifts so that loading docks operate 24 hours/day. Or, even more radically, rebuild and redesign our road network to expand lanes in/out of congestion areas. The bottom line is that all of these efforts translate into increased costs that impact everyone. In fact, The Texas A&M Transportation Institute survey mentioned above estimates that $27 billion alone in truck congestion costs in 2011 was passed on to consumers in the form of higher prices.

And, even if the driver pay problem is resolved, you still need to solve all of the other challenges, such as lifestyle issues or demographics, listed above. The driver shortage problem is far from finding a solution, and the worst may be yet to come. Yogi Berra also said, “The future ain’t what it used to be.” While we’re hoping that driver shortages are resolved in the future, we’re also not overly optimistic.

Visit American Trucking Association for more information on driver turnover and the driver shortage.

For more information about driver shortages, please contact Oleg Yanchyk.

People Profile: Jim Locke, Design Transportation

We recently interviewed Jim Locke, President of Design Transportation Services, based in Dallas. Founded in 1989 with a single truck, Design has grown to a fleet of 250 late model tractors and over 500 air ride trailers today and is one of AFN’s core carriers.  Jim joined as president two and a half years ago after working for Schneider National, USXpress and other large National Carriers for the past 18 years. But, prior to getting into the business, Jim was on an entirely different career path in the skies, not on the road.

Q: You graduated from Embry-Riddle Aeronautical University.  What brought your career from the skies back to the ground?

My education started a bit later in life. I married my high school sweetheart Carol at the age of 18 (and wife of 31 years now) and passed on college thinking I had the world by the tail.  When you are young you not only think you know everything; you fail to listen to the advice of your parents. But, after about a year and a half of trying to provide a good life for my wife and then soon to be first born, I realized I needed an education or at least some sort of trade. My options were limited at this point so I decided to join the military and pursue a career in Aviation as an Air Traffic Controller. I entered the military as a private, and received my FAA Certification in record time.  However, as a private in the military you were often assigned the less glamorous duties and in most cases never told why. It was early on that I decided that I needed to take another step and so I applied for Officer Candidate School. While rising through the ranks from 2nd Lieutenant to Captain I was given many opportunities to not only pick the tasks that my soldiers would do but in a lot of cases explain to them why they were doing them. Although the military’s philosophy is grounded in the mentality of “just do it”, coming from the ranks had given me a deeper appreciation for the questions that others had. Having held both those roles certainly taught me a lot about leadership and I apply that philosophy to my work today.  There was never a time that I ever dreamed about trucking as a career but I’m really glad it brought me here today.

While in the military I served as an Air Traffic Controller and then later I trained as an Air Defense Officer, qualified in all weapon systems to include the shoulder fired Stinger missiles up to the famed Patriot Missile Defense System.  Even though I enjoyed the military, once our second child was born, while we were stationed in Germany, it became evident that it was going to be difficult to raise a family while on active duty. I was ready for a change but those trades and education I sought seemed almost as distant now as they had 10 years earlier. There wasn’t much need for a person in civilian life that could shoot enemy rockets down with a US missile rocket system.

Fortunately for me, Schneider National was hiring JR military officers and gave me a shot in the civilian world and that was my introduction to transportation and logistics.  In the last 18 years, I have done everything from Operations to Customer Service to Sales and held various leadership roles. All of those different roles, along with some great customers and mentors have allowed me the opportunity to lead Design Transportation.

Q: What are the main changes and challenges you anticipate will impact the transportation business in the next 3 years?

While there are a lot of things that keep us awake at night, top of mind for me are driver shortages, rising fuel costs and governmental regulations.

The shortage of drivers – and I should qualify that and say good drivers – points out a few industry-wide issues.  A few years ago, some still held to the old belief that you put people behind the wheel and make it work.  That’s not an option anymore and we’ve been very proactive in ensuring that we hire the best drivers and staff that are available.  We have very good people who want to be here at Design and contribute to the success of our organization. The average driver age at Design is 43, well below the industry average and for that we are extremely grateful.

But an aging driver fleet is an industry wide concern.  As an industry we typically haven’t done enough to attract good young people to the jobs. On top of that is an industry turnover rate sometimes above 85%.   At Design, we’re trying to change that by running exceptionally nice equipment. The average age of our trucks is 2 years and we are fortunate to be in a position to continue that purchasing model. We also pay above the industry average and pay driver earned bonuses weekly.  And, perhaps most importantly, we treat our drivers not as numbers, but as human beings. We know them by name and, while that shouldn’t be out of the norm, it makes a big difference.  We’re in a growth mode now and have the people and we feel the customers that will help to propel us forward.  Not so much by growing just market share but by the profitable growth of our organization.

Of course, rising fuel costs are also impacting our business and the industry.  There is a huge misconception that fuel surcharges make up for the difference in fuel prices and what the trucker is absorbing. There are some shippers that believe that truckers are actually making money from surcharges and that’s simply not the case. We pay our fuel bills on a daily basis and the rising costs take a bite out of the bottom line. Remember too that a rise in fuel prices is only a small part.  Anything petroleum-based is rising. Tires are up 25%, windshield wipers, oil changes, engine belts, and other maintenance items have also risen, once again impacting the margins on all of our business. The ironic part of our business is that when a shipper needs a load moved, the carrier moves it, absorbs all of the cost up front and then collects those charges hopefully 30 days later.

Finally, government mandates are having an impact as we all know.  Design took a proactive approach and embraced the CSA mandates over a year ago.  In addition to the safety aspect, this has already proven to be a competitive advantage and we know we are ahead of the game as the changes go into effect. Design is 100% EOBR equipped and we use extensive checks and balances to make sure our safety and CSA scores continue to outshine the competition. Design is an active member of the American Trucking Association and other viable organizations. Shippers want, and are aligning themselves with carriers that make safety a priority.

Q: Tell us about your history with AFN…why do you choose to do business with us?

AFN is not your typical logistics company.  It’s young, progressive and innovative and I think it would be exciting to be there right now. I would relate it to the same excitement as it must have been when Steve Jobs was starting Apple.  AFN is making an imprint and approaching the business in a new way.

Our history extends to when I first arrived at Design. The AFN team came out to see me to explain what they do and describe how we can best work together.  It’s been a collaborative relationship from the start and we actually view AFN as a business partner. It’s an overused cliché, I know, but AFN and Design work together in so many areas like safety, security, claims, government regulations and freight.  Unlike some in the business, they don’t shoot a bunch of loads over to see what sticks. They look to use us for freight that fits our network.   It’s an on-going relationship, rather than a transaction and folks like Jared Palmer and Alex Witt have really been instrumental in our success.

Q: Your sales materials state “We believe shipping is not an event but a repeat business process”. How do you put those words into action?

When you have a diverse background like I do, working in so many different roles, it really gives you an appreciation for the other guy. Carriers, shippers and the consignee all have needs and it’s a matter of working together to find that fit. That means that sometimes you do more than expected or do things out of the ordinary. You should always WOW the customer. How does this translate to Design Transportation? It’s doing whatever it takes to make the customer’s experience positive. Challenges, as we all know, are a fact of life in any business. Here, they escalate up the chain for resolution and end with our leadership team. Our folks are so good at finding the reason that a problem existed and to try and make sure it never happens again. As a carrier if you can’t make it a positive experience for the customer, they will look elsewhere. At Design, we know that picking up and delivering the customers freight is a privilege and we never take that lightly.

Q: What would be your best piece of advice for someone just getting into the business?

Stay away! Seriously this business is way more than picking up and delivering on time.  You need to be an expert at many things in order to succeed.  You need, first and foremost, to be a student of human behavior. Our drivers often work two to three weeks at a time and are humans, not machines, and they’re not flawless.  None of us are and if you can admit that upfront you will always be a lot more successful. You also need to understand and be willing to learn the analytics behind the business, from safety to fuel usage to how to economically purchase your equipment.  We just completed a purchase of 75 new tractors, for instance, and went through every spec, line by line, looking for comfort, lighter weight for fuel economy and greater safety so that we can perform better for our customers.

Also, you need to want to work the hours.  This is a start-early and end-late business. Hard work will pay off but you have to be willing to work for it.  Customers have reached out to us because of who we are and what we have accomplished. We do not accept mediocrity or failure as an end result. In an industry where you are often known only by the success of the last load you carried, a long-term reputation is something that must be worked on every day.  We’ve just been named Carrier of the Year for one of our customers for the 10th year running and I think that’s the best validation of our approach.

Finally, surround yourself with the best people in the industry. That’s what I’ve done from drivers, to office staff to customers. I truly am lucky to work with such great professionals!