Lou Smyrlis

What should shippers make of the much-anticipated revisions to US hours-of-service regulations for trucking and the acrimony that has followed?

There are several things certain to have an impact on shippers using for-hire carriers to haul freight into the US or who use their own private fleets. The first involves the productivity of motor carrier operations under the new rules, which go into effect in 2013.

While daily driving time was not changed from 11 hours, the maximum hours a driver can work per week was reduced by 12 to an average of 70. The new rules, laid out by the Federal Motor Carrier Safety Administration (FMCSA) also require drivers using the 34-hour reset provision (used to get drivers started on a new duty cycle) to take at least two nights off between 1 a.m. and 5 a.m. According to the FMCSA, research shows that crash risk increases with longer daily and weekly work hours. So it made sense to reduce the number of hours a truck driver should be expected to work because consistently working long hours is associated with chronic fatigue, higher risk of crashes and chronic health problems. But it didn’t make sense, according to the FMCSA, to also reduce the number of hours a driver is allowed to drive in a day because the research did not show a “significant distinction” between the risk associated with working 11 hours versus 10 hours or 9 hours.

The US trucking industry, although pleased to be keeping the 11 hours of driving time, is not happy about the significant reduction in maximum weekly driving time. Dan England, chair of the American Trucking Associations and chair of C.R. England, believes both the trucking industry and shippers will suffer the impact of reduced productivity and higher costs. Motor carrier executives say the loss in productivity will force them to add both trucks and drivers to compensate. Any loss in productivity should be a concern to shippers doing business in the US because industry experts believe trucking capacity is getting tight. Our own Transportation Buying Trends research, conducted in partnership with CITT, CITA and Cormark Securities, shows that Canadian shippers expect truckload carriers to have the most significant pricing power in 2012 and tightening capacity is a major contributor to this.

England also believes these changes may actually increase truck-involved crashes by forcing trucks to have more interaction with passenger vehicles when the rules require drivers to rest from 1 a.m. to 5 a.m. twice per week. The largest percentage of truck-involved crashes occur between 6 a.m. and noon, so this change will put more trucks on the road during the statistically riskiest time of the day. That too should be a concern.

The final area of concern is the possibility the new hours of service could end up bouncing around US courts for years before anything is resolved. That has been the reality since 2003 when the FMCSA decided to increase daily driving time to 11 hours from the 10 hours which had been in effect since 1939. The rule was immediately challenged in court by the Teamsters union and safety advocates who, unlike the FMCSA, believe the research shows that additional hour does make a difference in driver safety and health. The 11-hour daily driving limit has actually been rejected twice by a federal appeals court yet remains in effect. Further legal challenges are almost a certainty. Gregory Beck, a lawyer representing safety advocates, has already served notice that renewed legal action is possible. And on the other side, Bill Graves, head of the American Trucking Associations has also warned that his members are not happy with the reduction in the driver work week and will be considering legal options.

Aside from the uncertainty created by the constant legal challenges, what should be a concern is the drain on resources this creates both with the government and with motor carriers. Fighting over whether one extra hour of driving actually has a measurable impact on safety takes time and concentration away from other areas – for example, emerging technologies such as lane monitoring or collision avoidance systems – which could have a larger impact on improving truck safety and productivity.

I also hope you will continue the conversation on issues affecting all transportation modes by joining me in the Transportation Track at the upcoming Supply Chain Canada conference, May 8-9, International Centre, Toronto. Go to www.supplychaincanada.com to register.

Despite the current challenges in the global economy, Canadian trade volume is expect to expand 1.4x by 2020. The profile of that trade is also changing with increasingly less of it coming from our traditional trading partner, the US. There are currently 50 trade agreements in the works with countries from all over the globe. Expanding trade,however, raises the challenge of dealing with sometimes vastly different customs regulations and the penalties for non-compliance can be hefty.

At the same time, cash-strapped governments around the world are looking to raise money and government officials know there is money to be found in supply chains. Canadian Border Services Agency audits, for example, have increased dramatically since 2008. In such an atmosphere, where the potential for costly screw-ups is growing and government agencies are aggressively looking to catch and penalize customs infractions, compliance becomes the price of admission to global trade.

Does your company structure support your customs compliance strategy?

At CITT’s recent Reposition 2011 annual conference in Montreal Reynold Martens, executive vice president of GHY International, made the case for rethinking the way most companies currently handle their customs compliance strategy.

Most companies tend to compartmentalize their trade activities into import and export functions, with separate groups working independently with outsourced providers of financial, legal, trade, and customs services. For many companies the related supply chain functions are managed by the business information group, either through an inhouse customs and trade department or in collaboration with outsourced providers. This, according to Martens, can create a “silo” affect that, while effective for the day-to-day execution of trade-related activities, reduces or even eliminates visibility to the areas of the enterprise impacted upstream or downstream. For example, Martens points out that finance and administration becomes passive to this area of corporate activity aside from cash flow management.

Yet the reality is that customs-related regulators are involved in virtually every stage of the business cycle from product design and manufacturing all the way to final fulfillment and auditing. An incomplete picture of how customs regulations impact a company’s overall structure can lead to failure to build in allowances that at best result in ineffective product costing and at worst financial troubles when regulators impose fines and take away trading privileges key to a company’s survival. Martens provided the example of a multi-national vehicle manufacturer, serving markets in Europe and North America, which failed to accurately classify a major component imported by one of the its Canadian divisions, resulting in overpayment of duties by $250,000 annually. It is estimated that the impact of this omission after production burden costs and overheads were applied, was double that amount at the point of sale, resulting in margin erosion.

As the saying goes, what’s known can be managed; what’s unknown is a disaster waiting to happen.

Martens believes the better alternative is an integrated trade compliance strategy. (GHY has authored a whitepaper on the subject.) Such an approach, Martens says, provides a horizontal channel of accountability between the business operation, finance and administration, and business development areas; and a vertical link to the service providers, executive team, CEO, and board of directors. While the fundamental structure of the company remains intact with no major rework of the reporting structure, or the core functional role of each of the primary components of the enterprise, all stakeholders have a role to play in the effective execution of the integrated strategy, beginning with the board of directors who set the risk appetite, and place a priority on legislating that checks and balances are in place at all levels, with appropriate accountabilities and audit trails.

Martens says the end result of a fully integrated international trade strategy is increased predictability and visibility of regulatory consequences and opportunities. The whitepaper provides the example of a leading manufacturer of household accessories which was able to save over $6,000,000 annually in duty by designing and implementing an effective NAFTA management strategy. The company invested in a compliance champion to track and log the flow of imported inputs through all the stages of the manufacturing process. By doing so, they were able to benefit from multiple duty reduction programs, saving costs and gaining competitive advantage.

As Martens stressed, working towards an integrated customs compliance strategy is not merely an exercise in compliance; there may be significant savings to be realized as well.

We’ve done something great, something groundbreaking, with the help of one of the most respected organizations in this industry. And I can’t wait to tell you about it.

But first I need to give you a little background so you can understand why I’m as excited as I am. You see, for the past decade every opportunity I got -- whether it was when invited to speak to industry groups, or when sharing data with companies wanting to market their equipment to the Canadian trucking market, or in simple conversations with the many industry friends I have made over the past 20 years – I have made a point to stress the importance of private trucking.

Why? Well, first, being as involved with industry stats as I am, how could I not? Private trucking is the quiet giant of Canadian transportation. It’s at least as large as the for-hire sector, if not larger, accounting for about $35B in annual activity. There are close to 12,000 private truck fleets, according to our records. Used correctly and under the right circumstances, and sometimes in combination with for-hire carrier services, running a private fleet can be an excellent way to have direct control over transportation costs, capacity and customer service.

But the main reason I have always stressed the importance of private trucking is that I have long felt it does not get the attention or respect it deserves – not from the media, not from marketers and certainly not from the government agencies tasked with understanding the industries they regulate.

It has been more than a decade since Statistics Canada or Transport Canada has done any substantial research on private trucking. How can such negligence be justified when private fleet transportation is estimated to account for 2.5% of Canadian GDP? How can such negligence be justified when sectors crucial to our economy, such as wholesale trade, retail trade and construction are so reliant on private transportation? The result of this ongoing negligence, I believe, is too many supply chain decisions being made and too many opinions held in the absence of recent and reliable market data.

Okay, enough complaining. Let me now tell you what I’m so excited about.

Transportation Media has worked with the Private Motor Truck Council to finally get private fleet managers the kind of specific market data they require to make informed decisions about their operations. The first project from this initiative, the 2011 Canadian Private Fleet Practices Benchmark Study, is now available. Our goal was to provide private fleet managers with benchmark information that will allow them to compare their practices and results with similar operations and with the fleets employing “best practices.” We gathered data on more than 100 questions across 13 categories, ranging from key challenges and composition of private fleets to operational costs, operating policies and hiring practices.

Let’s look at idling policies, for example, to see the kind of information you can glean from the Benchmark Study. Not only can you use the Benchmark Study to find out the percentage of private fleets that have an idling policy, but you can also compare how many do so by size of fleet and also compare that to fleets judged to be employing industry best practices. But that’s not all. You can use the Benchmark Study to find out which idling time limits are most used by private fleets – 0 minutes; 1-3 minutes; 4-5 minutes; 6-10 minutes; over 10 minutes. Need more information, such as whether policies like automatic shut off or different rules for summer vs. winter are being used? No problem, we have that too. And, of course, you can compare those as well by fleet size and against the industry leaders.

Oh but we didn’t stop there. We really wanted this information to be comprehensive; we really wanted private fleets to be able to compare apples to apples. So you can use our date to benchmark by geographic scope of operation and by region too.

We believe our research provides valuable input for private fleet managers looking to plan for the future. The report is available for purchase through our sister publication’s Web site. Simply go to our sister publication’s Web site www.trucknews.com and click on the 2011 Canadian Private Fleet Practices Benchmark Study icon on the top right. It’s a quick download.

Have a read and let me know what you think.

In preparing my speaking notes for McMaster University’s Translog 2011 conference in Hamilton, CITT Manitoba’s annual get together in Winnipeg, Transcore’s annual user’s conference in Brampton and other conferences I was recently invited to speak on the transportation trends, I was expecting to tell a story of continually improving conditions for motor carriers.

After surviving through two nightmarish years where they saw their rates contract in the range of 15% to 25%, I knew carrier executives were very anxious to see an upward bounce in what they get paid for their services.

I also knew that carrier executives were looking to a confluence of events – an improving economy, higher freight volumes and tighter capacity – to create the right conditions for significant rate increases and that many industry experts were forecasting the exact same pressures. Consider this statement from a report I recently read entitled Domestic Transportation, Finding the Right Balance of Volume, Capacity and Pricing: “Supply chain professionals who are responsible for securing transportation services – regardless of mode – are about to reap the benefits (or pay the price) for how strategic and mutually beneficial their company’s carrier relationships have been over the past two years. But make no mistake, costs are on the rise in either case. The only question is whether a company’s increase will be closer to 2% or 20%.”

Sounds pretty encouraging if you are carrier executive and rather disconcerting if you are purchasing transportation. But, so far, it hasn’t come true.

As many of the carrier executives I’ve been speaking to have confirmed, those hoped for rate increases are proving difficult to nail down. Almost all of the increase in rates in 2011 has come from the fuel surcharge, which is now up to almost 20% of the base rate on average, according to the latest data from the Canadian General Freight Index published by Nulogx. I’ve hosted several shipper panels over the past couple of months, both on retail and the manufacturing side. Whether it was Heather Felbel, vice president , supply chain with Indigo Books & Music or Brian Springer, vice president of transportation at Loblaw Companies or Mike Owens, vice president of physical logistics at Nestle Canada, buyers of truck transportation are proving fiercely resistant to rate increases at this point. And if they are going to agree to one, it’s certainly not going to be because trucking companies have been taking it on the chin the last two years. Consider Felbel’s recounting of how she handled one of her carriers asking for an increase:

“I ask my carriers to come to the table in a very educated way. I had one carrier recently that said ‘Here’s the price increase’ and I went ‘No, thank you, unless you can tell me what this is for and justify it, right back atcha.’”

Shippers do, however, seem very interested in working more closely with carriers to understand the parts of their business or practices that are creating unnecessary costs for the carrier and boosting the carrier’s margins by improving on those areas.

Of course, sheer supply and demand pressures may force higher rates. Our own research, conducted late last year, showed that 60% of shippers expected an increase in their shipment volumes in 2011 and 43% expected to increase their use of LTL services while 48% expected to increase their use of TL services. Transport Canada statistics show there was definite drop in
Class 8 truck registrations starting in 2009 and sales of new Class 8 trucks so far this year, although on the rise, are still lagging far behind the banner years of 1999 and 2000 and 2004 to 2008.

So if freight volumes are on the increase and capacity is on the decrease, why isn’t the capacity squeeze placing greater upward pressure on rates?

Because over the past couple of months both the Canadian and US economic recoveries have hit a soft patch that is giving shippers breathing space. Every major economic indicator I’ve been looking at lately – from RBC’s Canadian Manufacturing Purchasing Managers Index to ATA’s US Truck Tonnage Index to The Shippers’ Condition Index published by FTR Associates – confirms that the second quarter was a dud as far as economic growth is concerned.

However, it’s important to remember that no recovery is a straight upward line. Brief periods of slow economic activity are the norm, not the exception. I would not be surprised if by the end of summer or early fall, that confluence of events that carrier executives were banking on placing upward pressure on rates did come into play.

I recently spoke with Greg Laurin on how Conestoga Cold Storage is helping customers meet the challenge of cost containment while preparing for growth. He had some very interesting insights to share.

CT&L: Over the past two years of recession, users of temperature controlled services concentrated on cost containment. As we head into the recovery, how is their focus changing?
Laurin: Food manufacturers have hit a wall in terms of cost containment. Worldwide uncertainties - political and environmental - combined with the increased cost of oil and raw materials have forced the industry to take on more expense than it can possibly absorb. The softer US dollar has helped ease inflationary pressures to a certain degree for companies that can source raw materials from outside the country. Expect to see more manufacturers passing along higher costs to the consumer by the end of the year. A stronger economy should help our customers servicing the restaurant industry as that sector tends to be the hardest hit in financial down times. A stronger economy results in higher commodity prices and increased inflation, therefore we are locking in long-term financing rates as well as concentrating on debt reduction.
A dramatic change for the food distribution model in Canada is the increased number of retailers adding frozen and refrigerated lines to their traditional dry listings. From the arrival of Walmart and their full grocery line to the impending arrival of Target in 2013, existing major Canadian retailers are attempting to increase sales by adding food products to their stores. This trend is gaining momentum as more non-traditional food retailers such as Shoppers Drug Mart, Giant Tiger and even Canadian Tire increase frozen food offerings. These additional sales channels and the resulting fragmentation of the market will drive up distribution costs. Smaller order sizes result in greater picking and trucking costs. Adding food items will also challenge the distribution model of retailers not accustomed to the complexities of multiple temperature zones, date rotation, HACCP, CFIA control and the challenges associated with food related recalls.

CT&L: How is Conestoga addressing the current challenge of cost containment while meeting the need for growth among its clients?
Laurin: We have addressed these challenges by increasing efficiency and fine-tuning our systems. We have recently reviewed all of our key suppliers to ensure we are getting the most value for our money. Price increases are always difficult to pass on but there is generally an understanding that cost increases do occur in areas that are beyond our control. If the US economy continues to strengthen and the rapid growth continues in developing countries, inflationary pressures are going to put a strain on cost containment over the next 12 months. Gaining efficiencies and improving labour productivity is always of paramount concern as labour is our largest expense. We continue to invest in our computer systems and have introduced new software logic into our automated buildings that allows the system to look at upcoming order demand when it is idle and move product to the most efficient locations in order to manage peak-shipping times more efficiently.

CT&L: Technology can be a key differentiator in both improving efficiency to foster growth while at the same reducing waste and unnecessary cost. Which technological capabilities are becoming a must for superior service when it comes to the cold chain and what does Conestoga offer in this regard?
Laurin: We continue to pursue improvements in automation technology and source the best equipment from around the world to improve our systems here in Canada. We recently upgraded all of the drives on our stacker cranes to AC drives. These drives are cheaper to maintain, allow for more precise control and provide a 40% increase in vertical and horizontal speed. These devices are regenerative drives that feed energy back into the grid when braking, further reducing our energy costs. A new laser locating system interfaces directly with the new drives instead of communicating with a PLC. This gives us far better motion control and precise location measurement to within 1 millimetre over a 200-metre distance. We have completely redesigned our shuttles to allow us to handle heavier and taller pallets as well as installing wireless cameras on the ASRS cranes to allow us to control the stackers from the dock. We continue to invest in high-speed battery charging units that significantly reduce battery-changing downtime. We are also investigating the economic benefits of hydrogen power. Over the next 12 months we will be monitoring the technological developments of hydrogen power. This new technology could prove to be a very competitive option to current battery systems.

CT&L: Last we spoke you were working on the purchase of a 4.5 million cubic foot cold storage facility next to the airport in Montreal. Can you update us on how that purchase is working out and what it has added to your service capabilities?
Laurin: The purchase of the facility was completed in May 2010 and we have been working hard since then to fill the new space in a difficult market. We established our reputation for superior service in 2006 with our first warehouse in Quebec. Our reputation and experience has helped us develop a new customer base and we have been able to transfer some existing customers into our Dorval facility. We were at capacity at our original location prior to the purchase of the new facility. As a result, we were unable to offer distribution services to our customers from Ontario looking to enter the market in Quebec and the East Coast. With the additional 15,000 pallet positions we have been able to transition existing Ontario based customers into our new location. We also have ample room for future growth. This new location, close to the main highway and Montreal’s largest container yard is providing an ideal alternative for many of the food manufacturers located close to the Trudeau airport.

CT&L: Are there more such expansions to your network in the works for the near future?
Laurin: We have had an aggressive growth strategy in the Canadian market and have continually expanded to meet our customers’ increasing space requirements. We are currently reviewing expansion options in Ontario but the West and East seem to be well serviced from a cold storage perspective. Our rapid growth has helped us gather a first class list of top tier food manufacturers and has keep costs down by spreading out overhead costs.

CT&L: How is the need to provide more environmentally sustainable business practices affecting the temperature-controlled industry and how is Conestoga responding?
Laurin: More than 60% of our capacity is high-rise type storage buildings. This unique warehouse design gives us an advantage from an environmental standpoint because the buildings are inherently more energy efficient. They have a small roof load, small doors and no lights creating heat inside the building that has to be removed. Our refrigeration systems automatically shut down during periods of high hydro demand thus reducing our energy consumption during peak hours. We utilize the waste heat generated by the refrigeration systems to heat the dock areas and supplement the under floor frost-protection systems. The money we save on energy efficiencies can be passed on to our customers.

Every successful trading society throughout history – from the Persian and Roman empires of ancient times to the European Union and United States of today – has understood the importance of an effective, harmonized, transportation system.

I wonder when Canada will learn that lesson?

From the ridiculously long time it took to get anywhere close to harmonized weights and measures and the mess we have endured at our busiest border crossing for decades, it would seem that narrow-minded and short sighted provincial thinking too often places the greater good in jeopardy. What has been happening in Quebec over electronic onboard recorders is just the latest example.

Forward-thinking motor carriers have begun investing in electronic onboard recorders to improve their hours of service compliance and respond much more quickly to discrepancies and violations than is possible through the outdated paper log method. These carriers should be commended for their initiative. And also for having the patience and determination to deal with all the driver fears surrounding e-logs. I have had candid conversations with several early adopters of e-logs so far and they all say the same: they are a much more efficient way to deal with hours of service than the paper logs currently being used by the majority in our industry. And they are much less likely to be falsified.

Yet, for some reason beyond understanding, enforcement officers in Quebec recently took to fining carriers for failing to provide paper logs during roadside inspections. And they weren’t holding back on the fines either. For example, Total Logistics Group received a fine of $956 for failing to provide paper logbooks. The company reported that one of its drivers was pulled in for inspection by an enforcement officer who was not familiar with e-logs. The driver first offered to provide a paper copy of the records by faxing the documents to the inspector’s office, however after some consideration the officer reportedly said a fax wouldn’t suffice. The driver, who had a paper logbook with him, then offered to update it to match what was displayed by the EOBR. But the officer told him he had to update his logbook before leaving the terminal, according to Total Logistics, adding that the officer said he’d never seen an e-log before and it was not accepted in Quebec.

The Canadian Council of Motor Transport Administrators (CCMTA) EOBR working group labored for some time to come up with an EOBR protocol for enforcement agencies across the country. This way how inspectors from various regions accepted, viewed and interpreted electronic logs would be harmonized. That’s what countries that are serious about having a national transportation system do. They ensure that carriers and the supply chains they serve are not handicapped by conflicting regulations and practices as they cross each provincial boundary.

The CCMTA’s policy recommends that inspection officers first try to interpret the logs via the device’s display screen, which is usually attached by cord to the dash so it can be handed out the window to an officer. Failing that, the CCMTA’s policy suggests inspection officers allow the driver to fax the records to the scale house, where they can be viewed in printed form.

Sounds pretty reasonable but I guess it wasn’t good enough for some of the enforcement folks in Quebec. We even heard of one instance where the driver informed the enforcement officer that e-logs are legal in Canada, only to be told “You’re not in Canada, you’re in Quebec.”

Such actions by Quebec’s enforcement officials have left carriers who were wise enough to be early adopters of the e-log technology either second guessing their decision or, worse, holding off on moving to e-logs.

Since our executive editor James Menzies brought this issue to the industry’s attention on trucknews.com and with a front-page story in our sister publication, Truck News, a meeting involving several stakeholders has been held. By the end of the three-hour meeting, SAAQ policy makers promised to remind their front-line enforcement officers that e-logs are to be accepted in the province, provided they meet all the regulatory requirements.

Now the whole fiasco is being chalked up to a simple lack of communication between policy makers and enforcement officials and confusion over whether the enforcement folks should be accepting CCTMA policy.

Isn’t it funny though how enforcement officials are always quick to point out that ignorance of the law is no excuse? Perhaps Quebec’s enforcement officials should follow their own advice and understand the law before enforcing it. It would be one small step towards removing the small-minded actions that routinely interfere with Canada having a truly national and harmonized transportation system.

The transportation and logistics practices so ingrained into our business culture – from JIT deliveries to global supply chains -- stem from trying to most efficiently distribute goods produced in massive production runs and reliant on economies of scale. But there is a new manufacturing technology that may change both manufacturing and the supply chain practices that support it.

In a recent cover story, the Economist declared this new technology “may have as profound an impact on the world as the coming of the factory did,” proclaiming a “new industrial revolution may be on the way.” Professor Richard Hague heads a world-leading manufacturing group and is so enamored with the almost limitless freedom the new technology gives to designers that he was quoted in the UK’s The Engineer magazine as calling it “almost as close to Nirvana as you’re ever going to get.”

And this is no far into the future vision. Dr. Hod Lipson, director of the Computational Synthesis Laboratory at Cornell, recently told the BBC: “In 20 years this technology will be mainstream.”

The technology I’m talking about is called additive manufacturing. It’s also often referred to as three-dimensional printing as it works in a similar way to a laser printer. Using this technique along with a blueprint on a computer, a solid object can be built up gradually from a series of layers - each one printed directly on top of the previous one. The raw material used is a powder, which can be a metal, plastic, aluminium, stainless steel, etc, or a combination of these. The object – a spare part for a car, a hearing aid, a bicycle frame – is built by either depositing material from a nozzle or by selectively solidifying a thin layer of plastic or metal dust using tiny drops of glue or a tightly focused beam.

When production becomes that easy, it does not require a factory in many instances and so greatly reduces the cost of manufacturing by making production lines and the expensive tooling they require unnecessary. Smaller items can be made by a machine like a desktop printer, in the corner of an office or the back of a shop, maybe even a house. And as the Economist and the other publications I read explained, three dimensional printing makes is as cheap to produce single items as it is to produces thousands. Just as important, since this new technology allows each item to be created individually, rather than from a single mould, each item can be made slightly differently at almost no extra cost. This could push business away from mass production and towards mass customisation for all sorts of products. For example, Digital Forming is a company already using 3D design software and offers a service to mobile-phone companies in which subscribers can go online to change the shape, colour and other features of the case of their new phone.

These three factors combine to undermine the economies of scale our current manufacturing business models – and the supply chain strategies that support them – are built upon.
Three dimensional printing is not new to manufacturing; 3D printers have been used in factories for more than a decade, but mostly to make prototypes faster and more cost effectively than with traditional methods. As the advantages provided by the new technology became more apparent they were put to use making final products rather than prototypes. Already more than 20% of the output of 3D printers is final products and that figure could more than double by the next decade.

This is certain to change transportation and distribution practices. Customization is certain to lead to smaller and more frequent shipments. And when that is the case, would it make sense to have such products made overseas or would the move away from economies of scale reset the economics of regionally-based manufacturing and shorter shipping distances? That possibility was already on the agenda of a conference put on by DHL last year.

Add it all up, and the future of transportation and logistics could be significantly different from what we have become used to.

Anyone shipping to or from the US – and that would be most of you – needs to pay close attention to the firestorm of debate raging right now over the Federal Motor Carrier Safety Administration’s new proposed hours of service rules for trucking.

The proposal seems to have support from no quarter. Over the years I’ve learned that when opposing sides on an issue are critical of proposed legislation, it’s a good indication that legislators have struck a conciliatory and workable solution. But from the stakeholder comments I’ve read to this point and the commentary of experts on this thorniest of subjects (how exactly can you mandate someone to sleep anyway?), it seems the negative reaction on both sides may only lead to legal battles and the uncertainty that stems from a regulatory quagmire.

Most of the trucking industry concerns I’ve identified to this point centre on revisions that would:
- Add one hour of off-duty time within the 14-hour workday;
- Limit consecutive driving hours to 7;
- Reduce the maximum allowable daily driving time to 10 hours from the current 11;
- Require drivers to have two periods of rest between midnight and 6 a.m. during a 34-hour restart

The American Trucking Associations (ATA) claims the proposed changes will be enormously expensive for trucking and the North American economy. So do some prominent shippers. Wayne Johnson, who is in charge of carrier relations for Owens Corning and chairs the National Industrial Transportation League’s highway policy committee, buys into the trucking industry’s concerns about lost productivity and says that will, in turn, squeeze shippers. He told the media this would result in more trucks having to be used to get freight moved.

The (ATA) pointed out the FMCSA itself estimated, just two years ago, costs of over $2.2 billion if the daily drive time was reduced by one hour and the restart provision was significantly changed. The ATA contends that the FMCSA’s own research previously found that the eleventh hour of driving time does not increase driver weekly hours; is used for flexibility purposes; does not increase driver-fatigue risks; and that eliminating it would promote more aggressive driving (to meet time constraints).

With respect to the 34-hour restart, the ATA says the FMCSA is needlessly departing from past acknowledgement that requiring drivers used to sleeping during the day to now sleep between midnight and 6 a.m. for two consecutive days would actually be less safe. It would disrupt drivers’ circadian cycle and force them to drive more during the day, adding to congestion and again increasing crashes.

What makes this issue a political hot potato is that the opposing side is also keen on changing these provisions. Public Citizen, Advocates for Highway and Auto Safety, and the Truck Safety Coalition want the 11th hour of allowable daily driving gone and don’t think the proposed changes to the 34-hour-restart provision go far enough. They want drivers to take 48 consecutive hours off before they can resume their schedule. They believe the proposed rule “does not eliminate any of the anti-safety provisions that allow truck drivers to drive and work long hours, get less rest and drive while fatigued.”

Here’s my take on all this: Both safety and efficiency must be taken into consideration but, within reason, safety must trump efficiency. But when it does it must be based on solid science. All stakeholders must avoid the temptation to view truck driving through the eyes of people who work normal hours. It may make perfect sense to someone used to working 9 to 5 that truck drivers should sleep at least two nights in a row between midnight and 6 a.m. before resuming their work schedule. But do we know what that actually does to people used to sleeping during the day or accustomed to sleeping at shifting times? Unless there is solid science that shows such a move would be beneficial, why consider it?

Is the FMCSA looking to “change something that isn’t broken,” as Johnson from Owens Corning charges? After all, since the current hours-of-service rules were brought in back in 2004, the trucking industry in the US has reduced its crash-related fatalities by 33% while both fatality and injury crash rates reached historic low, even during all the freight growth years.
Is new legislation certain to improve this safety record? If yes, then it’s only right to proceed. It not, why are we wasting our time?

How do you make supply chain a sexy enough topic that the average teenager heading off to college or university would want to learn about it and, possibly, consider a career in it?

While preparing for our first Future Leaders Roundtable (look for highlights on our award winning show Transportation Matters at ctl.ca) several participants and I shared our mutual concerns that despite the valiant recent efforts of groups such as the Canadian Supply Chain Sector Council (CSCSC), many teenagers (and likely their guidance counselors too) remain unaware of what supply chain management or logistics management really means and the kind of career opportunities available.

There are about 745,000 Canadians working in supply chain management jobs in Canada, according to figures provided by the CSCSC (excluding professional drivers) with an annual growth rate of 2.1% from 2001 to 2009. Prior to the recession the sector was growing fast enough that it needed to add about 14,500 jobs a year from 2001 to 2009. But it faces a serious problem as a large proportion of the current workforce approaches retirement age. The CSCSC estimates that the sector could face a vacancy rate of more than 80,000 jobs a year in the future due to retirements and turnover.

That’s not good news when you consider that many demographers forecast a shortage of workers will hit every business sector in Canada over the next 10-15 years. That will leave our sector battling with every other sector for the best and brightest. Yet how many shows do you see on television about logisticians compared to shows about medics, lawyers, enforcement officials, journalists, bankers and traders. Heck, even the repo guys get more attention than logisticians.

So how do we first get inside the head of the typical teenager considering a career path and then how do we capture the passion in his or her heart?

Sitting in on the recent CITT annual conference, it hit me that one way to do so is to go big, larger than life. We need to show logistics in the limelight and on the international stage. And this year we were afforded just the right opportunity to do so with the Winter Olympic Games in British Columbia. Tony Beck , director of logistical operations for the Vancouver Organizing Committee (VANOC) along with Jeff White, general manager of Pacific Overseas Forwarding and Jonathan Lutz from CP Rail were on hand at the CITT event to provide a behind-the-scenes look at what is involved in hosting the Olympics and their story was a compelling one.

Think of the magnitude of this event – all the countries involved, all the athletes and trainers and judges, and media and volunteers and all the equipment and materials they need to do what they need to do exactly when and where they need to do it. As Beck pointed out, if you were to pick up any Olympic facility and shake it, everything that would fall out was brought there by logistics. And then think of the pressure involved in having the entire globe focusing in on the Games and media only too happy to report on any screw-ups. The television audience hit 3 billion.

And yet the about 650 logistics staff who worked on the Olympics (about 150 of them from VANOC and the rest from other supply chain partners such as Pacific Overseas Forwarding and CP Rail) pulled it off. I would say they were the unsung heroes of the Olympics. Just how involved were they in every facet of the Olympics? Beck told an inside story I’ll always treasure. We all remember that glorious moment when Team Canada took gold in the hockey final. Many of us have seen that historic picture of the players smiling in triumph while posing around a sign that read Vancouver Olympics 2010. If you look closely enough, the “r” in Vancouver looks a bit funny, it’s a bit down and to the right. That’s because it fell off just moments before the historic photograph and it’s held up chewing gun, provided, of course, by one of Beck’s logisticians. Making sure things work right to the final moment.

Folks, our logistics triumph during the Winter Olympics is a story worth telling, over and over again, across this country. It’s a strong way to awaken the minds of future workers to just how interesting and rewarding and just downright fun a career in logistics can be.

For several years now I’ve been appointed to provide the wrap-up and summary at Richard Lande’s popular Transportation Innovation and Cost Savings Conference. I joke with the wily Richard that by giving me this task, he’s finally found a way to ensure the media shows up on time, pays attention and stays till the end. Truth is, challenging as it may be to summarize the thoughts of several industry experts on several different topics into one cohesive 15-minute summary, I actually enjoy the experience. I’ve found over the years that if you pay close enough attention there is usually a common thread to be found in the words of the industry experts.

Yet I must admit this year I found that task particularly difficult because I couldn’t take my mind away from the words of the first speaker: Peter Hall, vice president and chief economist with Export Development Canada. Over and over throughout the day my mind kept drifting back to Hall’s gloomy message: Our domestic economy, the US economy and the global economy are all moving slow enough right now that the probability of a double-dip recession is high. The likelihood of falling back into the financial abyss is getting close to 50%, according to Hall.

Can he be right, I kept thinking throughout the day. Can our industry have survived the deepest recession of the post war era, with many carriers practically hanging on by their fingernails, only to drop back into the black hole of economic despair after such a short period of economic recovery? I spoke to many of the conference participants during the breaks throughout the day; they all kept saying the same thing: we hope he’s wrong.

Problem was he sounded so convincing.

There are several reasons we may be headed for a double-dip recession, according to Hall. He believes the aggressive growth we saw during the end of last year and during the first quarter of this year had much to do with all the stimulus spending from governments around the world but is now petering out before real economic growth kicks in. He’s also concerned about several signs of weakness in the US, the world’s largest economy. He believes the US housing market still requires another year to recover and US consumers may need as long as that and perhaps a bit longer before they feel secure enough about their savings to get back to normal spending levels. He also sees trouble for the global economy with Japan and China headed for recession. And this time around, debt-loaded governments don’t have the maneuvering room to help sustain their economies like they did two years ago.

Yet as convincing as Hall is (and having heard him speak before and being a fan of his weekly column I have a great deal of respect for him), we should be cautious in accepting his reading of the situation as gospel. Leading transportation industry forecasters speaking at the recent Commercial Vehicle Outlook Conference seemed just as certain that fears of a double-dip recession are overblown.

Despite startling new housing figures that showed sales of previously-owned US homes were down 27% in July and housing starts down 12% compared to June, Eric Starks, president of FTR Associates said there’s little reason to fear a double-dip recession and pegged the likelihood of such a scenario at just 10%. Starks, who keeps a Trucking Conditions Index, believes what we will get instead is several months of very slow growth that will make motor carriers feel like they’re treading water. The only way the US economy is falling back into recession, Starks believes, is if it gets hit by some external global issue.

Those sentiments were echoed by Donald Broughton, managing director and senior analyst with Avondale Partners and a frequent guest on TV news and business programs. Broughton blamed those very programs for creating unnecessary anxiety.

“People are way more worried than they should be,” he said. “(Freight) demand is going up. It’s going up across the board, in every single freight mode.” He urged attendees not to be discouraged by mainstream media reports or stock market selloffs.

“Markets are a reflection of us; we are full of greed and full of fear. It takes a long time to instill confidence in us and it takes no time at all to instill panic,” he said of the markets.

Sounds like sage advice to me….until I see the third quarter numbers anyway.