Tuesday, November 23, 2010

Trucking Industry

The Trucking Industry is about to be turned upside down. Truck drivers are anxious... trucking companies are anxious.... and shippers??? They will become anxious.


In the Fall/Winter of 2010 (right now), here is what will be happening:

  • SafeStat will be replaced by the CSMS. CSMS will be available to the public, including shippers and insurance companies.
  • FMCSA/States will prioritize enforcement using the CSMS.
  • FMCSA will begin to issue Warning Letters to carriers with deficient BASICs.
  • Roadside inspectors will use the CSMS results to identify carriers for inspection.
So why is this such a big deal to drivers? transportation companies? shippers?

It's Time for You to Meet "Bob"

Bob is your typical driver working to make a living to support his family. He has always picked up and delivered his load on time, taking care of the customer. Bob did what he needed to do in order to keep that customer happy. He also made sure that Schilli Transportation was happy with his performance and took care of his Driver Manager. Bob did what he needed to do. Sometimes that meant stretching his logbook out, running when he should be sleeping, and taking a chance he would go unnoticed. Sometimes he was stopped, inspected, and negotiated his way out of some sticky situations. A warning ticket here and there was worth the sacrifice.

Now along comes Uncle Sam with something called CSA 2010! The word on the street is that drivers will now be held accountable for their actions. Bob has always held himself accountable so no big deal or is it?

Now Bob wonders will companies “Do the Right Thing” and take care of all of the hard working Bob’s out there?

Bob had an experience recently that made him question if he is still willing to accept loads going to customers that often created delays. Bob was planned on a load and actually loaded and began driving towards his destination. Unfortunately the customer had moved back the delivery time from 10:00 am to 2:30 pm while he was enroute. Bob had to sit for 4.5 hours extra before he could unload. When Bob got unloaded, he only had 2 hours of service left and he had 3.5 hours to drive to get home for his son's birthday party that night (Friday).

Before the new CSA 2010 rules, Bob probably wouldn't have given it a thought to just drive a couple extra hours to go home. Now, Bob is concerned because if he gets caught in a road inspection, his log book will show that he stayed on the road over the 11 hour limit. This would appear on his personal record and seriously impact his chances to continue his career as a truck driver.

Bob had to call his wife and son and tell them the bad news. The real problem is that Bob is really starting to wonder if trucking is really for him and his family - this is the second time in three weeks that this has happened to him due to this customer delaying his unloading. The delays have hurt Bob's wallet, as it is not uncommon for him to lose 3-4 hours of driving time while waiting. Bob's been a good driver, but with the new CSA 2010 rules, he's now being more selective to take loads that go to consignees that are known to have frequent delays. He's no longer willing to take any more chances that cost him money or cost him family time.

CSA 2010 is a Game Changer but are we really prepared to cover Bob’s back? Think about this if you are a shipper. The "Bob's" of the world are going to be forced to say "no" a few times in order to protect themselves. Shippers are going to have to adjust the way they do business if they want "Bob" to continue to do a good job for them.

Monday, September 27, 2010

Truckload Pricing - Where is it Going?

Truckload pricing has a big impact on the bottom line of our customers. Of course, truckload pricing also has a big impact on the carriers as well. There never seems to be a happy medium between shippers and carriers - if there is, just wait - it will certainly change with the market conditions.

This is a good article that we found on Transport Topics. We hope that it will give you a good feel for where the market is heading and why.

Transport Topics - 9/24/10
NEW YORK — Many carriers, particularly in the truckload sector, said they are winning rate increases from shippers that typically are at least 5%, reflecting the industry’s tight capacity.
As truckload fleets report rate increases, third-party logistics firms such as Transplace Inc. are trying to minimize them, and less-than-truckload carriers want more price increases, executives said at Dahlman Rose’s investor conference here Sept. 8-9.

“Shippers wouldn’t be giving 7% to 10% increases if they thought they could get someone to cover their freight [for less],” said Paul Will, chief financial officer at truckload carrier Celadon Group Inc. “We are able to lead the pricing discussion with our customers,” said David Jackson, chief financial officer at Knight Transportation, another truckload fleet after seeing rates fall 7% and 10% since the recession began. “In the end, [shippers] haven’t given back all that they took,” he said, noting that Knight is particularly focused on boosting profits on 30% of its freight that has the lowest margins. “They are at risk of not getting capacity,” he said, referring to shippers in that lowest margin group.

Third-party logistics companies acknowledged the price pressure. “The challenge we have with our customer base is setting their expectations that rates are going up, not down,” said Robert Bianco Jr., president of Con-way Inc.’s Menlo Logistics unit. “The pendulum has swung in favor of asset-based trucking companies. Our challenge is to be the middleman and limit those” increases.

“We have been moderately successful in holding off the increases,” said Matthew Menner, a senior vice president at Transplace Inc., Frisco, Texas. “We had to push the eject button for carriers that were pushing yield.”

Dana Burleigh, senior supply chain manager for Schneider Logistics, said, “We took advantage of double-digit decreases. Our goal is to try to mitigate the increases. Some carriers are asking up to 5% across the board.” Schneider Logistics’ parent company is truckload carrier Schneider National Inc., which declined to comment on the carrier’s rates.

Other sources confirmed the rising rate pattern. Transport Capital Partners’ August carrier survey showed 63% reported rate increases of 5% or more. Jason Seidl, a Dahlman Rose analyst, said a major less-than-truckload carrier has notified customers it plans to raise rates by about 5%.

“Now that someone has [raised rates], there is a higher likelihood others will follow suit,” Seidl said. “There is a better chance this increase will stick in this current period because there is a lack of capacity in LTL.” Seidl said such increases apply to 20% to 30% of freight and occur two or three months later in the year.

Some LTL executives welcomed the change without saying whether they also would boost prices. “The industry needs price increases,” suggested Richard O’Dell, chief executive officer of Saia Inc., Duluth, Ga. “Anytime someone takes a general rate increase out of cycle, that should be a positive.”

“There is an opportunity to move price,” said Richard Gaetz, CEO of Vitran Corp., Toronto, which raised rates 4% this year. “We are hearing a lot of good chatter in the marketplace. It’s a good opportunity for the LTL industry to catch up with the pricing initiatives of the truckload, rail and ocean carriers.”

Others were more circumspect.

“We haven’t seen any price increases on paper,” said Wes Frye, the chief financial at Old Dominion Freight Line Inc., Thomasville, N.C. “It will be difficult for competitors to have further wage and benefit cuts, so [margin improvement] will have to come from pricing.”

“ABF is not going to be a leader in [raising prices],” said Arkansas Best Corp. CEO Judy McReynolds, whose LTL carrier is based in Fort Smith, Ark. “It remains to be seen if someone will follow.”

While some shippers raised rates this year, Wal-Mart Stores Inc., Bentonville, Ark., wasn’t one of them. Greg Forbis, senior director of corporate traffic for Wal-Mart, said, “We gave a rate increase in 2009, but not in 2010.” Carriers that forgot about that increase and tried to raise rates more recently are finding that “their business is a lot smaller now.” Wal-Mart is moving to control inbound shipments from major consumer goods suppliers such as Procter & Gamble, intending to lower costs for both the retailer and its customers. He acknowledged that Wal-Mart struggled at times with volume surges when it did take over inbound shipments. “Any burp in the volume tended to take things into a tailspin,” he said.

He also noted that Wal-Mart is converting inbound shipments to intermodal whenever possible.

Click here for a link to the actual article from Transport Topics.

Tuesday, September 7, 2010

Transportation Economy

The Transportation Economy is affected by manufacturing.

According to Businessweek, the U.S. Economy shows that manufacturing is expandedat a faster pace than expected during the month of August.

Rather than creating an entire article that is going to tell you the same thing, I found a great report from Businessweek

Bottom line is that there are many people screaming "the sky is falling" (insert the word "economy for sky"). Have we heard this before? Does chicken little ring a bell from your elementary school days??

While there are people screaming that the end is near, why don't we look at the facts concerning the economy and make our own conclusions.

The article from Businessweek puts everything in perspective and you may be surprised to hear that manufacturing is still expanding.

By Courtney Schlisserman
Sept. 1 (Bloomberg) -- Manufacturing in the U.S. expanded at a faster pace than forecast in August as factories added workers and cranked up production.

Stocks rallied as U.S. and China manufacturing figures tempered concern the global economic recovery will wane without more government stimulus. Production gains may partially compensate for a slowdown in consumer spending and sluggish housing market that are causing the world’s largest economy to cool in the second half of the year.

Manufacturing is “one of the bright spots,” said Hugh Johnson, chief investment officer at Hugh Johnson Advisors LLC in Albany, New York, the only analyst surveyed to predict the index would rise. Still, “you have to have increased demand from consumers and businesses for these numbers to be sustained.”

The Standard & Poor’s 500 Index increased 3 percent to 1,080.29 at the 4 p.m. close in New York, the biggest gain since July 7. The yield on the 10-year Treasury note rose to 2.57 percent from 2.47 percent late yesterday.

China’s purchasing managers’ index rose to 51.7 last month from 51.2, a government-backed report showed. A separate measure released by HSBC Holdings Plc and Markit Economics also increased.

U.S. manufacturers are benefiting from growth overseas. Caterpillar Inc., the Peoria, Illinois-based maker of construction and mining equipment, may add as many as 9,000 workers worldwide this year, Chief Executive Officer Doug Oberhelman said at a meeting with analysts Aug. 19.

Housing Weakens

While factories are helping extend the recovery, the housing slump keeps taking a toll on the economy. Construction spending in July fell twice as much as forecast, led by a slump in homebuilding that will depress growth, Commerce Department figures showed today.
The 1 percent drop brought spending to $805.2 billion, the lowest level in a decade, after a revised 0.8 percent decrease in June that wiped out a previously estimated gain.

President Barack Obama said yesterday reviving economic growth was his “central mission” after declaring the U.S. combat mission in Iraq over. The president, in a nationally televised speech, underscored that he’s focused on the economy at a time when voters are increasingly skeptical of his policies and congressional elections are a little more than two months away.
ADP Employment

Another report today raised concern about employment. Companies in the U.S. unexpectedly cut employment in August, data from a private report based on payrolls showed. Employment fell by 10,000, according to figures from ADP Employer Services.

Manufacturing, which accounts for about 11 percent of the economy, spearheaded the recovery from the worst recession since the 1930s as rising export demand led companies to ramp up spending on equipment and to replenish stockpiles. Estimates in the Bloomberg survey of 78 economists before the U.S. figures ranged from 49.9 to 56.

The group’s production index increased last month for the first time since April, while the employment gauge rose to the highest since December 1983.

Production may start to cool as the report showed a gauge of bookings fell in August to the lowest level since June 2009, while backlogs eased.

A gauge of factories’ inventories showed stockpiles increased for a second straight month.
Federal Reserve

Federal Reserve Chairman Ben S. Bernanke last week said the central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if growth slows.

“Investment in equipment and software will almost certainly increase more slowly over the remainder of this year, though it should continue to advance at a solid pace,” Bernanke said.
Intel Corp., the world’s biggest chipmaker, last week cut its third-quarter revenue projection, citing weaker-than- expected consumer demand for personal computers in mature markets as the reason for the adjustment.

Cisco Systems Inc., the world’s largest maker of networking equipment, in August forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.

Cuts in Forecast

Economists at BofA Merrill Lynch Global Research in New York today cut U.S. growth forecasts for the rest of this year and next. The world’s largest economy will expand at an average 1.65 percent annual pace from July through December and grow 1.8 percent in 2011, a half point less than previously estimated.

“ The two most important monthly indicators -- private payrolls and core retail sales -- have stalled,” the economists headed by Ethan Harris wrote in a note to clients. “At the same time, the post-tax-credit housing hangover has been worse than expected, and even the business equipment recovery shows signs of faltering. Our sense is that the growth recession is already here and it is likely to linger through the first half of next year.”

For a link to the article click here

Monday, August 9, 2010

How Driver Recruiting Will Affect Shippers

Should CEO’s be concerned how driver recruiting will affect shippers? The short answer…. Yes.

Drivers are leaving their current positions to “go where the money is”. Many carriers, feeling the driver shortage crunch, are fighting hard for those seasoned drivers. According to Transport Topics, carriers are being forced to raise their mileage pay and many are paying sign on bonuses to attract top drivers. Six out of seven carriers are paying referral bonuses up to $1,500.

According to Jeff Davis of Jet Express, “There are so many motor carriers who are just holding their own and living from month to month.” He feels that the new CSA 2010 guidelines can be the “straw that breaks the camels back”, as the new safety system will disqualify drivers for violations that previously didn’t count against them.

Any prudent person can see where this is going. Carriers who are still fighting to regain losses from the recession face a tough decision. Either they don’t pay their drivers additional wages, signing bonuses, referral fees, etc. and keep their rates the same for their customers OR they pay higher driver wages to keep their fleets going and charge higher rates to their customers.

It’s a tough choice, but shippers need to be aware of what is going on in the transportation industry. Some industries are still slow while others have increased tremendously. The real problem is not if the economy expands, the real problem is keeping enough drivers in trucks to transport goods across our country.
CEO’s need to watch this closely, as transportation is normally one of the largest line item expenses on their income statements. Their transportation managers may be faced with a tough job ahead of them if no trucks will come to their doors. Without trucks delivering their goods to THEIR customers, the CEO’s may face a serious shortage of their own – satisfied customers.

The driver shortage is very real. Companies are not only paying recruiting referrals, sign on bonuses, and increasing pay, but they are also marketing like never before.

Click here to see the Schilli website for Flatbed Jobs.

Below is a video that is also being distributed throughout the internet for potential drivers to review.

Friday, July 16, 2010

CSA 2010 Training

CSA 2010 Training is becoming critical for carriers who have staff that don't understand the ramifications of this new safety program. It's not just the drivers, but dispatchers and planners need to understand the ins/outs of this new program.

CSA 2010 is all about reducing the fatality rate with large commercial vehicles such as busses and trucks. Even though the current mortality rate is the lowest since the DOT began keeping records, the FMCSA still believes that there is room for improvement.

CSA 2010 is the FMCSA's program to more efficiently monitor carriers and be able to "intervene" when carriers data points to an increased probability of an accident. Moving violations (warnings or tickets are weighed the same), overweight, driver logs, etc. are being scrutinized like never before. These records will become public information, which can severely hamper a carrier's ability to provide service to customers - especially when those customers will simply be able to review each carriers risk.

Picture: Schilli CSA Training in St. Louis. Pictured from left to right: Tom Schilli - CEO; Larry Shaw - Terminal Manager Shoals, IN; Joyce Schilli - WVT of Texas General Manager; Mike Zachary - Business Development Manager; Cindy Bull - Planner; John Simms - CSA Presenter/Trainer; Charles Cassity - Terminal Manager St. Joseph, MO.

So what does this have to do with dispatchers and planners??? Here's the real impact this new system is going to have on both carriers AND SHIPPERS..... driver's will NOT do things that will add a risk to their public driving record.

This is going to pose a problem as planners will need to be able to communicate to the customers that their "emergency load" will not be able to be delivered until the driver can legally start up his truck and drive 1,000 feet to the dock - he's out of hours. In the past, many drivers would simply go the extra mile when needed to accomodate a shipper's request. Drivers are not going to want to do this any longer, as if they get caught they will be penalized and so will the carrier. They simply can't afford to take the risk.

Hours of service is becoming the key buzz word at Schilli Transportation Services. No longer can planners and dispatchers simply give a load to a driver and tell them it needs to be delivered at 2:00 am. Driver hours must be considered and, at times, the customer service group must make that dreaded call to the customer "Our driver cannot legally make your delivery requirements". All carriers are faced with this issue which means all shippers are faced with this issue - whether they want to hear it or not.

Wednesday, July 7, 2010

CSA 2010 Explained

CSA 2010 Explained

I'll apologize now for the length of this post, but CSA 2010 needs to be explained.

On June 23, 2010, the senate had a hearing on the implementation of CSA 2010. Keith Klein, representing the American Truckers Association (ATA), testified of the numerous flaws that CSA 2010 will be bringing about.

Here is a synopsis of the issues that that ATA has according to his testimony before the U.S. House of Representatives, subcommittee on Highways and Transit.

Crash Accountability

The ATA is concerned over crashes that are not caused by the trucker. Under the CSA 2010 guidelines, all crashes are weighted the same. Even those that are not caused by the trucker. The ATA feels that this is not equitable and will penalize good drivers. There is tremendous concern that the FMCSA will make this public and shippers will have the wrong idea about carriers.

Exposure Measurement

The FMCSA currently uses the number of trucks to rate the exposure of a carrier. The problem with this is that there are those carriers who have tremendous utilization of those trucks and other carriers who have trucks that are parked. The exposure is rated the same for both, which is not equitable. The ATA feels that FMCSA should rate the exposure based on miles run, not the number of power units.

Warnings for Moving Violations

The FMCSA is currently counting all moving violations and warnings the same. The problem with this is that a warning is simply that – a warning. The driver has no way to go through due process to have the warning removed. The problem, of course, is that this will go on the driver’s record regardless of the validity and will be used to measure the carrier’s safety performance.

In many states law enforcement officers must have probable cause in order to stop a truck and perform an inspection. In these states, it is common practice for enforcement
officials to stop trucks for trifling speeding offenses (e.g., 3 mph over the limit), and issue
warnings as justification to conduct inspections. As a result, carriers operating in these states are disproportionately impacted and likely have worse driver violation scores than carriers who operate elsewhere. For example, based on data we obtained from one large, national motor carrier, trucks operating in Indiana – a probable cause state – are four times more likely to receive a warning for speeding than carriers operating in non-probable cause states.

Inequitable Treatment of Flatbed Carriers

An additional concern is the disproportionate impact of CSA 2010 on flatbed and other open deck carriers. These carriers have a far higher risk than other carriers of being cited for load securement violations since the violations are more evident (visible) and because they typically have far more load securement requirements. This problem is especially acute given the fact that, as mentioned earlier, all load securement violations bear the maximum severity weight in the scoring system.

Because open deck carriers are placed in peer groups with van bodied carriers, their relative performance is often seen as worse - simply because they comply with tougher requirements and because their violations are more evident. There is a very simple way to address this clear inequity; in order to measure their relative safety performance these carriers should be placed into a peer group of like-type carriers.

Representative Walz, a subcommittee member, asked the question “What does this program do as far as what you have to do to monitor and implement the program?”

Mr. Klein responded that larger trucking companies already have people in their safety departments, but their focus has to shift from accident reporting to safety monitoring and compliance. Smaller and medium sized companies will need to hire more people to monitor, train, and implement their program.

In summary, the goal of CSA 2010 is reduce the number of fatalities and accidents. Fatalities are currently at the lowest level since the DOT has been keeping records, but they feel there is still room for improvement.

Note to Shippers………

It was also brought up that many of the items that lead to violations can actually be controlled by the shippers. Shippers can often make demands upon carriers because their customer urgently needs something. Shippers are going to have to re-think, as drivers and carriers cannot afford to take the risk that they used to. If they do, there are likely to be “interventions” from the FMCSA and that is something that carriers just don’t want to have to deal with.

For a link to the full report, click here

Tuesday, June 1, 2010

New CSA 2010 Rules

New CSA 2010 Rules are making trucking companies and shippers nervous. There are many rumours floating around that 175,000 drivers will lose their jobs the day that CSA 2010 takes effect. While CSA 2010 does not actually give authority to the FMCSA to remove anyone, it is still unclear as to what actions state agencies will take (who DO have the authority).

As of May 27th, here is the updated timeline for the rollout of CSA 2010.

April 12 – November 30, 2010 – Motor carriers can preview their own data by seeing their roadside inspections/violations and crash events organized by Behavior Analysis and Safety Improvement Category (BASIC).

Summer 2010

June 30th – The Operational Model (Op-Model) Test will end.

July – The four “50/50” Op-Model Test states, Colorado, Georgia, Missouri and New Jersey, will join the five 100% Op-Model Test states in implementing the program.

August – Motor carriers will be able to see an assessment of their violations based on the new Carrier Safety Measurement System (CSMS) which will replace SafeStat later in 2010.

Fall/Winter 2010 - SafeStat will be replaced by the CSMS. CSMS will be available to the public, including shippers and insurance companies.

FMCSA/States will prioritize enforcement using the CSMS.

FMCSA will begin to issue Warning Letters to carriers with deficient BASICs.

Roadside inspectors will use the CSMS results to identify carriers for inspection.

Winter 2010 - Safety Fitness Determination Notice of Proposed Rulemaking (NPRM) is scheduled to be released.

2011 – Enforcement staff will be trained, and new interventions will be implemented State-by-State

Monday, May 17, 2010

Truckload Freight Rates - Up or Down?

Given that almost no new capacity is being added to the market, any increase in freight volumes has to tighten capacity a bit.
Truckload freight rates are on every shippers mind. Will they continue to rise, or will shippers be able to get them back to where they were a year ago - cheap!

We've noticed that trucking rates in certain sectors have been increasing for the past few months - especially the flatbed market. But what about van freight??

There certainly are a lot of opinions about how fast rates in the greatly depressed truckload and LTL sectors are likely to begin some sort of recovery along side a now growing economy.

Recently, transportation industry analyst John Larkin predicted that rates would stay low into 2012 even with economic recovery, for reasons ranging from increased use of technology by shippers in sourcing transportation to continued over capacity in both the TL and LTL markets.

There is, however, another opinion out there. Meet Charles Clowdis from IHS Global Insights. According to Charles, he believes that rates will rise more rapidly than many analysts have predicted.

According to Clowdis, the number of carriers and owner operators that went out of business has lowered the total supply of trucks in the US. He believes that this point has led to a straining capacity currently, and will force pressure to raise rates sharply higher if shippers want to get their freight moved.

Clowdis states that “Many carriers, both truck load and less-than truck load, have not replaced their fleets on a schedule that puts the most fuel-efficient equipment requiring less maintenance into service,” meaning fewer trucks will be available on any given day.

All told, Clowdis predicts TL and LTL rate hikes in the 7-10% range, “as capacity decreases and becomes more valuable to serve the released consumer demand.”

Of course, even rates hikes in those ranges would still leave shipping costs well below rates in 2007, but from a current year perspective, if Clowdis is accurate, it could lead to sharp year-over-year cost increases that could affect a shipper’s bottom line and ability to meet transportation budgets.

But Wait - There's More

Transportation companies are being pressured to adhere to "Green Initiatives" by shippers. Overall, many of the green initiatives combine reducing miles driven, which lowers shipping costs and greenhouse gases (GHG) at the same time. Sounds great, right??

Clowdis, however, feels that it is not as "rosy" a picture and feels that there are some challenges to this.

“Pressures to lower CO emissions will require investment in more fuel efficient engines to meet Green Initiatives that surely will be mandated by shippers,” Clowdis says. “Decreased fuel efficiency likely to result from added emission control enhancements can decrease the miles-per-gallon trucks currently produce and add to carrier costs that can be passed along to shippers.”

The cost structures of the carriers will simply be passed on to the shippers if the carriers wish to stay in business. Many carriers have heavily borrowed in order to ride out the past recession - and at much higher interest rates. The only way to stay going for many is to raise rates to service the added debt. According to Clowdis, freight rates “will also be driven upward by the need to service debt incurred by many of the carriers that resorted to borrowing to sustain themselves during the downturn”. This will no doubt lead to additional pressures to drive rates up.

“Terminal and infrastructure facilities also will require investment to restore efficiencies in operational areas and handle increased tonnage,” he says, adding that such investments must be financed in part by some increases in freight rates.

All this leads to the conclusion that sharp “rate increases are a certainty,” according to Clowdis.

To further illustrate, the American Trucking Association (ATA) tonnage index for March reported an adjusted month over month increase of .4%. However, there was a 7.5% increase in freight volume. There have now been 4 straight months of year - over - year tonnage gains.

Given that almost no new capacity is being added to the market, any increase in freight volumes has to tighten capacity a bit.

Last week, ATA Chief Economist Bob Costello was quoted “For most fleets, freight volumes feel better than reported tonnage because the supply situation, particularly in the truckload sector, is turning quickly."

Tuesday, May 11, 2010

Controlling Transportation Costs

In order for shippers to control transportation costs, we thought we may help with some possible strategies. Of course, each shipper is different. Each shipper will have to consider many factors with methods to insure they get their shipments delivered in a timely manner during the current trucking capacity crunch.

Where Are We Today?

Currently, controlling transportation costs has been next to impossible with the current trucking capacity crunch. This loss of supply has been due to the many companies that have closed their doors or sold off un-utilized trucks during the recent recession. While many larger companies are starting to finally stop the losses, it is estimated that many smaller carriers are still in danger of losing their business. There is still a lot of uncertainty concerning the new safety regulations - many estimates are that over 175,000 truckers will no longer be eligible to drive once the new regulations take effect. See last week's blog article for more.

The Shipper's Perspective

Manufacturing is growing and has been expanding now for over 8 straight months - it looks like things are moving forward. This expanding along with the loss of trucking capacity (especially flatbeds and stepdecks) has created an environment where most shippers are being forced to "bid for trucks". This is not pleasant and most traffic managers are doing overtime to get loads moved.

What Can Shippers Do to Attract Trucks?

The market is going to demand that rates will be increasing (they already have been). There is little that anyone is going to be able to do to prevent the uptick in pricing just as no one could seem to keep pricing from going down during the recession.

Here are some "non-rate" items that shippers can do to attract trucks - especially if the rates are similar to the competition (competition is anyone taking your trucks from you!):

  • Make Your Facility "Trucker Friendly" - drivers appreciate the little things that make them feel welcome - clean restrooms, coffee pot, inexpensive snacks;

  • Improve systems for loading and unloading. - Time is money. If carriers are consistently delayed either loading or unloading, they will more than likely choose to go to a facility that does not delay. Detention is never the goal to collect an additional $100-200. Carriers and drivers are paid when the truck is moving, not sitting.

  • Be Flexible - Do You REALLY need a flatbed?? Flatbeds and stepdecks are the trucks that are the most affected by the capacity crunch. Can you make some minor changes and utilize vans? Vans, while still affected by capacity, are more abundant and you can possibly have your items shipped for lower rates than the flats.

  • Does the Load REALLY need to be tarped?? Drivers prefer to take loads that do not require tarping. Tarps can weigh 100 pounds and typically take 2 tarps to cover the typical load. Imagine if you had to lift 100 pounds of hard to work with material over your head - it can get old after a while. We're not advocating you take chances on cargo claims, but if a load really doesn't need to be tarped you may be more successful in moving it versus a load that does require tarping.

  • Offer "windows" to pick up loads versus strict appointments - flexibility in pickup and delivery times can make it easier for carriers to put trucks into your area. When they can "work them in", the freight is more valuable to the carrier and you may not have to pay as much as strict appointment freight.

  • Try to be understanding if a truck is not able to make your pickup or delivery parameters - We all understand that everyone has customers, and sometimes customers can be a little demanding (anyone ever heard of JIT?). It may go a long way for shippers to make an attempt to educate their customers concerning some potential issues with the current capacity crunch. Carriers need to do their best to communicate problems to their customers, but being delayed at other shippers can sometimes not be avoided. Trucks are getting older due to the financing squeeze put on carriers - they can't buy new trucks yet. There are going to be more truck break downs. If a transportation manager screams at a poor load planner if a truck is delayed, sooner or later that planner will make a decision to load with someone else. Not trying to excuse lack of performance - just trying to educate on the reality of the current truck supply;


We hope that this blog post will help transportation managers and company executives not only to understand the current trucking environment, but also to minimize their rate increase exposure.

Tuesday, May 4, 2010

Freight Rate Forecast

News Flash... Freight Rate Forecast Is In.
Fasten Your Seat Belt - It's Going to Get Rough out There!

Just this morning, I received e-mails from numerous shippers pleading for trucks. Yes, I said “PLEADING” for trucks. Shippers are faced with either increasing rates to compete against their competition or they face the problem of losing business to other companies who can find a way to get the product delivered.

What Is Going On???

According to research, I’ve found a few factors that seem to explain and then forecast what will happen in the future. Let’s start out by figuring out the cause.

Supply of Trucks

Trucking Bankruptcies

Some have already forgotten the greatest recession since the Great Depression. Trucking companies have not. According to Transport Capital Partners, Bankruptcies have idled 445 companies and 21,000 trucks in the 4th quarter of 2009. More than 170,000 trucks have been idled over the last six quarters.

Limited Speeds

Fuel has increased more than 38% today versus a year ago. It is estimated that fuel surcharges are only covering 75-80% of the actual costs incurred by the carriers - especially for long hauls. Carriers have resorted to limiting their truck speeds from 68 mph to 62 mph. This reduction in speed equates to approximately another .5 MPG. The problem? It takes longer to deliver loads and is estimated that drivers will fill up their log books quicker, resulting in an additional 2-3% loss of trucking capacity.

The Result - A Much Smaller Supply of Trucks

The graph shows what has been going on. We simply don't have the trucks on the road that we once did.

Demand For Trucks

While the supply of trucks has dwindled, what about the demand for them??

If you've been following along this blog at all you know that we are under an economic recovery that appears to be sustainable. Of course, that means more manufacturing, more retailing, etc.

That means more demand for trucks.

We all know what more demand and less supply equates to - higher rates.

Certain segments of trucking are in much more demand than others - such as flatbeds vs. reefers. Flatbeds are becoming very difficult to find.

So What About the Future?

There are a few capacity problems for the future.

Loans for New Equipment

Banks are not loaning money to companies that haven't shown a profit. This means that trucks are getting older and older and they are going to be breaking down more and more. This means that there are going to be more loads "piling up" due to truck breakdowns.

Attitude Towards Buying New Equipment

According to Transport Capital Partners, their survey shows that 45% of carriers polled indicate that they will not purchase or add equipment until their fleets are fully utilized and rates have increased. In 2009, 32% felt this way. Another 16% aren't making any plans until they feel the economy has improved and is stable.

CSA 2010

The new safety system will be taking effect at some point this year (exact dates have not yet been determined). It is estimated that up to 175,000 current drivers will become ineligible as soon as the new monitoring system takes effect. This will further put a short term strain on the overall trucking supply.

The Botton Line: If you are a shipper, be prepared for a rough ride the next few months.

Monday, April 26, 2010

Environmental Trucking - Is this Possible?

Environmental Trucking is not a term that most people think is reality. The conception is that trucks tremendously pollute our air and are tremendously hurting our planet.

While it is true that heavy duty trucks do use a lot more fuel than an automobile, let's look at some facts and then we can see what the trucking industry trends are with respect to protecting our planet.

The chart below shows the Top Ten Sources of U.S. GHG Emissions in 2005.

Coal burning, such as power plants, are the highest polluter of our air and represent 29% of the GHG emmissions. Passenger Cars are second with 17%. Medium and Heavy trucks represent 5%. Power plants also represent a large portion of the stationary gas and stationary oil segments.

The American Trucking Association (ATA) has announced that their new sustainability program has the capability to reduce trucking's carbon footprint by 19% or 900 million tons over the next 10 years.

The more fuel efficient and lower sulpher emitting engines, as well as better truck idling practices will make up the majority of these improvements.

In yet another move towards cleaning up the environment and the relationship of trucking, Navistar recently announced their new electric truck that can go 100 miles on a single charge. Once the charge has been spent, it takes 6 hours to recharge, and the batteries can be switched out in 15 minutes with it's "cassette" like construction.

For a link to the ATA website, click here

It looks like we are on the way for a cleaner environment. For an example of a currently heavy duty electric truck, see the video below.

Monday, April 19, 2010

CSA 2010 Basics

This post is the third in a series concerning CSA 2010 Basics. CSA 2010 is the new safety rating system by the FMCSA. There is a lot of concern over what will happen to shippers and carriers when this new system goes into full effect.

Today's post will discuss the effects on truck capacity as it relates to driver retention and driver recruitment. The information is gathered from FMCSA information.

What Happens if a Driver Incurs the Rating of "Unfit"?

If a driver receives the rating of "unfit", he will no longer be allowed to drive a commercial vehicle. The only thing that the driver can do is wait for some of his points to drop off in the 36 month "history" that will affect his driver score. At this point, most drivers would have to quit.

If a marginal driver is getting close, they CAN lower their overall score with a clean inspection.

The FMCSA has speculated that up to 175,000 current drivers would be declared "unfit" when CSA2010 goes into effect! This is going to put a strain on the current capacity of trucks on the road.

How Will CSA 2010 Affect Carriers Driver Recruitment Efforts?

Carriers will more than likely have a minimum safety rating requirement for hiring and firing drivers. This minimum rating could be mandated by their liability insurance companies. It is speculatated that insurance companies will require a minimum safety score or they will not insure the carriers. Should a driver fall below this minimum requirement, he/she would have to be terminated in order for the insurance company to continue insuring the carrier.

New drivers recruited would also have to follow the same guidelines in order to joing with a new carrier. The driver's safety record will need to be part of every carriers' background check.

Overall - it is anticipated from many sources that there will be a shift in capacity once CSA 2010 takes effect. This WILL affect carriers and shippers alike. The most like effect? Less trucks means higher rates to attract and maintain carriers.

Monday, April 12, 2010

Manufacturing Recovery Bolsters Transportation

Manufacturing recovery now appears to be here for good. There have been a lot of concern as to whether or not this recovery would be short lived and we could dip back into a recession. Shippers and carriers have both been waiting to see - now it appears that we have our answer.

The ISM Manufacturing Index has once again risen in the Month of March. The rate of 59.6 exceeded all 77 of Bloomberg's economists' predictions. Many manufacturers are realizing that their regular transportation carriers are now demanding higher rates in order to keep up with demand - there simply aren't enough trucks to go around.

This raise in the ISM is now the 8th month in a row. Not only is this a sign that our recovery is really happening, but the growth in the number of industries has broadened. In the past few months, 11 or 12 industries were growing while the remaining industries were still struggling. March showed that 17 of the 18 industries in manufacturing showed positive signs of growth. According to Norbert Ore, chairman of the Institute for Supply Management's survey committee, "We have to go back to 2004 to find numbers that are similar to that".

Ore warns that this high growth will be hard to sustain and that it may actually not be desireable for us to continue at this pace. He also indicated that the housing industry is still struggling and will probably still remain slow.

Consumer confidence will continue to play a large part of the economic growth and that comes with the addition of jobs. Mr. Ore indicated that many manufacturers are beginning to hire and the "numbers will come as production picks up". He feels that there will be a dramatic increase in jobs in the later part of the year. Ore goes on, "We have to keep in mind that manufacturers lost about 2.1 million jobs, so there's a lot of ground that's been lost."

For the actual interview with Norbert Ore, watch the video below.

Monday, April 5, 2010

CSA 2010 Information - How Much Will This Cost??

CSA 2010 will be one of the most pronounced changes in the trucking industry since the 1980’s and trucking de-regulation. There’s still a lot of questions going around – most companies don’t understand what CSA 2010 is and how it will affect them. On the surface, this program has very honorable intentions - but at what price??

Let’s start out be figuring out what CSA 2010 is all about. The DOT (Department of Transportation) is introducing a new process for determining a carrier’s safety rating. It’s called CSA 2010. The ultimate goal of CSA 2010 is to reduce the large truck and bus fatalities.

According to the Federal Highway Administration, 1979 realized 6 fatalities per 100 million miles traveled. In 1984 the Roadside Inspection program began and fatalities dropped to just under 5 per 100 million miles. In 1986 the Carrier Safety Rating program was launched and the fatalities gradually decreased to slightly over 2 per 100 million miles. It’s been a pretty remarkable improvement since 1984. CSA 2010 is trying to continue the improvement.

The key differences between the current “Safestat” system and the CSA 2010 system are listed as below:
If you will notice, there are more areas to do inspections on, all roadside violations will count against the driver, results of an inspection may lead to intervention for the carrier, violations are "weighted" as to the riskiness, and this now means that a single driver can severely damage the carrier's rating.

When a single driver can have serious consequences for an ENTIRE carrier, this means that carriers are going to be weeding out non-performing drivers. On the surface this sounds great!

Think about that for a moment, however. If you are a transportation manager, and you have less drivers in the marketplace, does this mean your job is easier or harder to find enough capacity to get your goods moved?? When you do find the carriers and trucks, will this mean a lower or higher rate to get everything moved???? How much will it cost each carrier to keep a more watchfull eye on their drivers?? How much more will it costs carriers to keep up with compliance?? Who is going to pay for all the added administrative costs???

Now you know why CSA 2010 is so important to not just carriers, but everyone who uses transportation to get goods to the market. This doesn't leave too many people out!

Monday, March 29, 2010

US Truck Weight Limits - Can We do 97,000 lbs?

What is the effect if Congress allows trucks to haul 97,000 lbs? It was controversial when they voted to allow 80,000 lbs back in 1982. What are the ramifications if you are a trucking company? A shipper? A driver??

Below is an article from Columbus Business First. Enjoy and keep an open mind.

Congress to debate whether or not to increase maximum truck weight limits
Orlando Business Journal - by Andy Ashby and Richard Bilbao Staff Writers

Two competing federal bills which will determine whether commercial truck weight limits should be raised to 97,000 pounds will revolve around debates on safety, infrastructure impact and the environment.

Congress is expected to update the Surface Transportation Reauthorization Act, also know as the Highway Bill, this year.

When it does, it will have to choose between two competing amendments: HR 1799, which will allow states to raise weight limits to 97,000 pounds, and HR 1618, which would freeze weight limits.

Congress set weight limits at 80,000 pounds in 1982, although some states in the West and Northeast had higher limits grandfathered in, said John Runyan, executive director of the Coalition for Transportation Productivity and a proponent of HR 1799. “It was controversial at the time going to 80,000 pounds,” he said.

Critics of HR 1799 argue that higher weight limits will deteriorate the nation’s highways. Also, bridges are built to certain capacity.

“Most interstate highways can more than adequately carry the additional weight limits today,” Runyan said. “Where a state identifies a particular trouble spot, which might be a bridge or a stretch of road, this bill gives them the authority to exempt it, so that route would no longer be permissible for the heavier load,” he added.

A key part of HR 1799 is that it allows states to opt for the higher weight limit, but only if a sixth axle is added. Runyan said this is critical because it allows companies to add more weight without increasing the weight-per-tire. “You’re not creating any greater impact on any square inch of road surface and you’re running less vehicles as a result.”

Higher weight limits also would mean fewer trucks on the highway to deliver a fixed amount of goods, meaning safer roads, said Runyan.

Heavier trucks also could mean environmental and economic savings. “Companies are in a pretty tough global fight for survival right now, and they’re looking for ways to reduce costs and improve their performance records at every turn,” said Runyan. “This gives them a way to do that.”

Also, the 97,000 pound weight limit would be more in line with Mexico, Canada and much of Europe. “We really lag the rest of the world, and that has an impact on the competitiveness of American products,” Runyan said.

The coalition said it would cost $6,000-$8,000 to upgrade an existing trailer to add a sixth axle and braking capacity, but companies also could buy new equipment.

However, the coalition said that cost could apply to about 25 percent of the truck fleet because not every truck carries loads that heavy. The coalition also argues that this could spur investment in truck upgrades or trailer replacement.

However, the Owner-Operator Independent Drivers Association opposes “increasing weight capacity for commercial vehicles because we don’t think there is any fuel efficiency benefit and we don’t believe it’s safe,” said spokesman Norita Taylor. Instead, the group backs HR 1618, which keeps weight limits static.

The association has 158,000 members throughout the U.S., mostly people who drive and own their own trucks. The organization argues that its members would not benefit from HR 1799. “Those who are pushing for this just want to move more without paying more to the people who are hauling,” Taylor said.

Even with the sixth axle used for safety, the organization is opposed to HR 1799, partly due to the capital investments that would be placed on owner/operators and smaller trucking companies and partly because of maintenance. “It’s going to be more wear and tear on the engines,” said Taylor. “You’re still adding weight to the same engine, so there’s not going to be enough fuel efficiency to justify the added danger.”

Local trucking companies such as Tavares-based Sunstate Carriers aren’t keen on the idea of increasing the load trucks can pull because customers may take advantage of it, said Sunstate President Richard Baugh. Sunstate Carriers employs 130 workers and runs 115 trucks up along the East coast from Florida to Canada and as far west as Texas.

“This legislations wouldn’t help out us shippers to generate more business because [clients] would want us to haul more weight at the same costs,” he said.

In addition, the increased loads would cause companies like his to have to pay more operational costs, because trucks would use more fuel to haul an extra 17,000 pounds, said Baugh.

However, Matt Ubben, spokesman for the Florida Transportation Association, sees several benefits from an increased load for local trucking companies. “Allowing for additional weight basically allows for less freight movement, which saves on fuel, the time a driver is on the road and maintenance.”

Ubben has heard the argument that safety will become an issue for both the truck driver and other drivers on the road. But he stressed that many Florida trucking companies make highway safety their main priority. “We got a pretty good track record here in Florida. The number of fatalities per vehicle miles traveled is down, so we feel very good about what we’ve been able to achieve so far.”

In brief
• HR 1799, the Safe and Efficient Transportation Act of 2009What it does: Allows a state to authorize the operation of a vehicle with a maximum gross weight of 97,000 pounds, as long as the vehicle is equipped with at least six axles, and the weight of any single axle does not exceed 20,000 pounds or the weight of any group of three or more axles does not exceed 51,000 pounds. In addition, it establishes a safe, efficient vehicle bridge infrastructure improvement program and apportions amounts from the Safe and Efficient Vehicle Trust Fund to states for eligible bridge replacement or rehabilitation projects. Versus• HR 1618, the Safe Highways and Infrastructure Preservation ActWhat it does: Freezes the maximum truck weight limit set by Congress in 1982 at 80,000 pounds beyond the 46,000-mile-plus Interstate System to encompass the entire 161,000-mile-plus National Highway System.

To view this article in full - click here.

Monday, March 22, 2010

CSA 2010 Explained - 175,000 Truckers Could Lose Their Jobs

CSA 2010. What is it? And why would 175,000 truckers lose their jobs the day it takes effect??

Here is an article that was posted in the "Trucking Forum". Whether 175,000 truckers all lose their jobs the day CSA 2010 starts is unknown. What is known, however, is that CSA 2010 is going to have an impact on not just truck drivers, but shippers as well. You will be reading more and hearing more about this in the months to come.


175,000 Truck Drivers could lose there job starting in July, 2010.

Have you heard if CSA 2010? If not you will be hearing a lot about it beginning next year (2010).

CSA 2010 could cost you thousands of dollars in fines and lost revenue due to "truck drivers" being declared “Unfit”. An estimated 175,000 truckers will lose their Jobs when CSA 2010 is implemented.

RIGHT NOW DATA ABOUT YOUR DRIVING Record is being recorded by D.O.T. for YOUR DRIVER SAFETY RATING when FMCSA's New CSA 2010 goes into effect.

Most motor carriers and drivers haven't heard of CSA 2010, yet it is quite massive in its scope, and represents a major change in the way the FMCSA audits companies.

Perhaps the most profound change, and how this affects individual drivers are going to be audited and each will be given a personal safety rating. This personal safety rating will determine weather or not the driver is considered eligible to continue driving or requires some sort of intervention.

Data used to calculate your safety rating comes from Roadside inspections, traffic violations (citations) and crash data. A new Driver safety rating will be determined EACH MONTH!

CSA 2010 intends to use new data--such as information from police accident reports about driver-related factors contributing to a crash--and improve existing data sources--by, for example, using its database of licensed commercial drivers to identify all drivers with convictions for unsafe driving practices, as well as the carriers they work for--to enable a more precise assessment of safety problems.

It is anticipated that full implementation of CSA 2010 by FMCSA will begin on or around July 1, 2010.

For a link to the Trucking Forum, click here.

Monday, March 15, 2010

Trucking Industry Trends

The meeting of the Truckload Carriers Association (TCA) was recently held in Las Vegas. There has been a lot of uneasiness the past couple of years, as freight rates had been going down to what seemed to be an impossibility for carriers to be profitable - many were not and are no longer in business.

Here is an article written by Ahern and Associates concerning the trucking industry trends.

Special Edition - Capacity Begins to Tighten

I recently attended the TCA and had an opportunity to meet with many of the "movers and shakers" in the industry. Many of these companies have been friends of mine for many years, so they were kind enough to share their thoughts on the capacity issue. The major concern;

  • Is the pendulum starting to swing?
  • Is the supply versus demand starting to change?
  • Does the industry expect freight volumes to rise?

I took the opportunity to speak to every segment of the market, and a common response was that----capacity is starting to tighten!

  • Some carriers are experiencing as much as a 20% increase in freight demand.
  • Some carriers have been able to obtain (slight) rate increases, and;
  • Shippers are going to have to start rethinking their thought process, if they believe that our industry is going to continue to haul cheap freight.

However, with that stated, don’t start buying more trucks because, even when the pendulum does swing, you have to remember that we’re a cyclical business. We all have to remember that trucking is a dollars business;

  • The supply and demand pendulum continues to shift, and;

  • The last recession should be a good lesson for all of us.

I was amazed hearing some carriers’ state that they’re starting to activate more equipment and buy more equipment. That’s the "kiss of death"!

  • Focus on your customers.

  • Focus on their needs, and;

  • Focus your energies on the customers that worked with you through the very difficult times

  • Start re-evaluating your shipper base and where you want to commit your equipment to achieve the highest rate of return.
The tone of the TCA meeting was upbeat.

However, at the same time, the TCA had Bob Costello, the Chief Economist for the ATA, panel a discussion with shippers. Bob indicated:

  • He is starting to see some increase in demand, but stressed;

  • Don’t get too excited, because;

  • The ATA believes that the market is going to continue to suffer for a period of time.

As an analyst, I will agree that we still have many financial challenges to deal with!

  • The United States (still) has a substantial amount of financial problems that they need to resolve.

  • The world economy, (still) has not adjusted, although imports into the United States are increasing, but;

  • All in all, it’s going to take time.

It was also interesting that there were a group of shippers, on the panel, with Bob Costello who indicated that;

  • It’s very difficult for them to provide loyalty to trucking companies, when they’re dealing with cost, and;

  • Shippers are going to continue to drive down cost, wherever possible, regardless of the relationships.
To me, that sent a very important statement; they just don’t get it! I recognize that, in a competitive environment, you need to be competitive, but when you’ve had a relationship with a trucking or logistics company for 30+ years and you leave them, (simply for money), in my thoughts process, that’s the "kiss of death". You don’t penalize someone, for being loyal to you for a long period of time.

Unfortunately, today, that’s becoming prevalent as the American way. However, it’s certainly not the Ahern way and it’s certainly not the way of many of my customers. Shippers need to change their mentality, if they want to survive a very difficult time in the future;

"As capacity continues to shrink, the shippers that have
continued to pummel the trucking industry, are going to be the ones that are
going to be affected the most."

From a trucking companies perspective and from the industry’s perspective;

  • Relationships are (still) important in our industry;

  • We all recognize that price is an important component, but;

  • So is service, and so is a relationship.

In closing, the conference (in my personal opinion) was a success because it sent a positive statement to the industry, that there are better times ahead. However, as stated; Be very cautious, because the industry is still struggling and it’s going to be a long time before we’re "out of the woods".

For a link to Ahern and Associates, click here.

Monday, March 8, 2010

Flatbed Freight Pricing Affected by Growth in Steel

6 months ago, we warned shippers that demand pressures would force flatbed freight pricing up. Looks like we were right - AND wrong.

Our reasons for price increases were that there were many carriers going out of business, which lowered the overall capacity in the market. Lower supply means increased demand (at least that is what our college econ teachers taught us). We were right in this prediction.

Another prediction that we made back in October of 2009 was that financing (or lack thereof) would keep small and middle privately owned companies from being able to purchase new trucks. We were also right on, as finance companies are still reluctant to lend to trucking companies, since most have not shown a profit for a very long time.

So how were we wrong??

We didn't see the rebound in steel throughout the midwest coming on so strong. We knew there would be a comeback, but we weren't expecting it to be this powerful.

According to the USGS (United States Geological Services) Metal Industy Indicators February Report, the Primary Metals Leading Index increased 1.4% in January to 142.2 from a revised 140.3 in December 2009. The 6 - month "smoothed" growth rate continued to rise, climbing to 19.2% from a revised 18.3% in December.

Will this continue??

The 6-month smoothed growth rate is a compound annual rate that measures the near-term trend. Usually a growth rate above +1.0% signals an increase in metals activity, and a growth rate below -1.0% indicates a downturn in activity. The leading index has increased every month since March, 2009 and its high growth rate is indicating that activity growth in the primary metals industry should continue. This is reflected by the high growth rate in the coincident index. Increased domestic manufacturing activity and the high metals demand from emerging economies appear strong enough to underpin a recovery in U.S. primary metals industry activity.

So Now What? What About Transportation Costs?

To translate what this means to shippers. Shippers have two options at the moment.

1) Play the spot market for pricing (remember that rates attract or scare away trucks during times of demand crunches). When demand for trucks increases, these shippers will be paying the highest rates in order to attract trucks;

2) Get trusted carriers to agree to "fair" pricing and take care of those carriers. Many shippers have changed their philosophy of trying to get the lowest priced carriers to taking a core group of carriers, giving them modest increases now, and saving on higher costs later compared to only doing spot rates.

Transportation managers are going to have some rough roads ahead for the flatbeds. Even vans are beginning to become a little more in demand, as some shippers are doing everything they can to convert some of their flatbed shipments to vans, where the demand is not so high - yet.

For the complete report of the USGS, click here

Monday, March 1, 2010

The Stimulus Plan for Infrastructure Spending

The Stimulus Plan for Infrastructure Spending

This is a great article that tells about the Stimulus Bill and how the funds are FINALLY going to be spent in 2010. This article was written by Kent Hoover, of the Memphis Business Journal.

About 23,500 infrastructure projects funded by the economic stimulus bill will begin this year, according to a study by Onvia, Inc., a Seattle company that tracks stimulus spending.
These jobs will put $76 billion in the hands of contractors and create 480,000 construction jobs, according to Onvia.

“Despite all of the talk about the stimulus working, our research shows most of the funds have not left Washington, although they will in 2010,” Onvia CEO Mike Pickett said.

“We also expect competition for these contracts to be fierce as more businesses seek to capitalize on the irresistibly large market created by government spending,” he said. “It will remain a buyer’s market as more companies follow the money and competition keeps a lid on costs.”
Last year, most infrastructure projects came in below estimated costs, Onvia found, which enabled government officials to expand the scope of some stimulus-funded projects.
Small businesses see little benefit from stimulus bill.

The $787 billion economic stimulus bill may have created or saved 2 million jobs, but most small business owners haven’t seen much of an impact from the legislation.

A February survey of small business owners by Discover Financial Services found that 70% said the stimulus bill had no impact on their businesses.

Only 10% said it helped, and 17% contend it hurt their businesses.

A separate survey conducted for CIT Group Inc. in December and January found that 90% of small business owners said they haven’t benefited from the economic stimulus bill.

The Discover survey, which focused on businesses with five or fewer employees, found lots of skepticism about the federal government’s ability to help them.

More than 75% said they were “not very confident” or “not at all confident” that the federal government and Congress could address the needs of small business owners, up from 62% a year ago.

Nearly 70% said it’s unlikely they would hire a new employee if Congress passed a proposed tax credit for businesses that increase the size of their work force.

The stimulus bill helped revive Small Business Administration lending by increasing the government guarantee on these loans and reducing or eliminating fees.

But 91% of the small business owners surveyed by Discover said they had never applied for an SBA loan, and 61% said it’s unlikely they would do so in the future, even if they were easier to get.

The CIT survey focused on larger small businesses, companies with annual revenues of $1 million or more. Nearly 60% of these business owners said small businesses would benefit from a proposed increase in the size limit for SBA loans.

Kent Hoover is Washington bureau chief for American City Business Journals. He can be reached at (703) 816-0330 or khoover@bizjournals.com For a link to the article, click here.

Monday, February 22, 2010

2 Signs That Show Manufacturing Recovery Growth

While people have heard about the economy improving, many are still wondering why our job growth hasn't happened yet. When economies come out of recessions, it is normal that job growth lags behind. Companies begin to have volume pick up, but there are two reasons they don't want to hire anyone just yet....

  • Most companies have had losses in previous months and need to keep the labor force "lean" in order to raise profits;

  • Most companies don't want to hire additional people until they feel comfortable that a recovery is here to stay;

Keeping these two principles above in mind, here are a couple of indicators that would lead us to believe that the economy IS making a slow but steady recovery that is sustainable.

Consumer Price Index Grows in January

The consumer price index rose 0.2% in January, the fifth consecutive increase, the Labor Department said Friday.

The CPI increase followed a 0.2% gain in December. The so-called core CPI, which excludes food and energy, fell 0.1%, the first decrease in that index since 1982.

The increase was lower than economists’ forecasts of 0.3%, Bloomberg reported. Energy prices jumped 2.8%.

The CPI is the government’s broadest gauge of costs for goods and services. Almost 60% of the CPI covers prices consumers pay for services.

If consumer prices are climbing, it could reflect an increase in demand for consumer goods, which increases the demand for trucking services.

New York Manufacturing Index Rises

Manufacturing activity in the New York region grew this month at the fastest pace in four months, the Federal Reserve Bank of New York said Tuesday.

The regional Fed’s “Empire State Index,” generally the first economic indicator in a given month, rose to a 24.6 reading, from 15.9 in January, the regional Fed said.

Readings above zero indicate expansion, while below that shows contraction.

The index was higher than economists’ forecasts of an 18 reading, Bloomberg reported.

Manufacturing is one of trucking’s largest and most important customer.

So What Does All This Have to Do With Transportation??

Transportation is all about supply and demand. The "Good Ole Days" of multiple carriers fighting over freight at discounted rates may be coming to an end. Many companies did not survive the recession and there are fewer trucks to go around. Financing is still enormously difficult for existing companies to purchase more equipment.

The Result?? The Perfect Storm

If the economy takes off, we're probably going to have a period where there simply aren't enough trucks to go around. Trucks are going to go the highest bidder, so they can recover from the past few months of dismal earnings and losses.

Be prepared today to lock in rates whenever you can. You may be better off by offering a slightly higher rate to carriers today, rather than waiting later when you can't find any capacity.

By taking some pro-active steps, the smart transportation manager may have to give a little today to protect his/her company's costs tomorrow.

Monday, February 15, 2010

Cass Freight Index - Where Do We Stand Now?

The Cass Freight Index is the benchmark as to what is going on in the transportation industry. To make the Cass Freight Index simple, it basically uses January 1990 as the benchmark, or a value of 1.00. The index measures overall freight activity.

January saw a light drop in both expenditures for freight and also the number of shipments. Historically, however, January normally does drop off. The important item is that the overall January year over year comparison shows that the freight index was up 5.6%.

According to Modern Materials Handling, here are some other freight indicators:

* US trade deficit for December 2009 was at its highest level in a year at $40.2 billion - exports were at $182.9 billion;

* The US Commerce Department announced US factory orders rose 1% in December for its eighth gain in 9 months;

* The Institute of Supply Mangement's Manufacturing Index hit 58.4 in January, the fifth straight month indicating expansion. A value of 50 indicates zero growth.

* The Port Tracker report from the National Retail Federation and Hackett Associates indicates that import cargo volume at US containers ports could be up by 25% year over year for the first half of 2010.

Overall, there are a few mixed signals, but growth is occuring in many of the indicators.

Photo courtesy of Rafael Vila, Auburndale, FL. http://www.revolutionvisualarts.com/

Monday, February 8, 2010

5 Myths About How to Create Jobs

What's in store for 2010?? Will manufacturing bring back all those jobs that were lost during the recession? Here's a great article from the Washington Post that gives great insight.

By James Manyika and Byron Auguste
Sunday, February 7, 2010

With the unemployment rate in the United States lingering just below 10 percent and the midterm elections just nine months away, job creation has become the top priority in Washington. President Obama has called for transferring $30 billion in repaid bank bailout money to a small-business lending fund, saying, "Jobs will be our number one focus in 2010, and we're going to start where most new jobs do, with small business." The fund is among several measures -- tax incentives, infrastructure projects, efforts to increase exports -- that the White House has proposed to help boost employment. As Americans consider the various approaches, we must have realistic expectations. We need to debunk some myths about what it takes to stimulate job growth.
This Story

1. Surely there's a quick fix.

Oh, were only that the case. The scale of the challenge is enormous. Quick action is important, but remember that the U.S. economy has lost more than 7 million jobs in the past two years. The country would need to create more than 200,000 net new jobs each month for the next seven years to get unemployment back to what was once considered a normal 5 percent. Quick fixes focused on 2010 alone won't be enough.
Of course, the right mix of government policies can help. But even if Obama's proposals were enacted right away and they accomplished all that he hopes, that would at best represent a good start. America's jobs challenge is a multiyear marathon, not a sprint.

2. The key to boosting employment quickly is to help small businesses.

New jobs come from both small and big businesses. From 1987 through 2005, nearly a third of the net new jobs were created by businesses that each employed more than 500 workers. By 2005, these big companies accounted for about half of the country's total employment, although they made up less than 1 percent of all U.S. firms.

But a look at the past two economic booms shows that the pace of job creation depends on more than the size of the businesses. During the economic expansion of the 1990s, large U.S. multinational corporations -- which employ an average of about 1,000 workers each in the United States -- created jobs more rapidly than other companies. This was because they dominated computer and electronics manufacturing, the sector that drove much of that boom. During the more recent expansion of 2002-2007, most of the net new jobs came from local service sectors, such as health care, construction and real estate -- which comprise both large and small businesses.

3. High-tech jobs will solve the problem.

There is a lot of talk these days about green businesses, biotechnology and other emerging industries that will create the jobs of the future. While they are obviously part of the solution, these industries are too small to create the millions of jobs that are needed right away. The semiconductor and biotech industries, for instance, each employ less than one-half of 1 percent of U.S. workers; clean-technology workers, such as those who design and make wind turbines and solar panels, account for 0.6 percent of the workforce.

We'll be able to generate significant numbers of new jobs only by spurring broad-based job growth across the economy, particularly in big sectors such as retail, wholesale, business services and health care. High-tech innovations will help employment grow over the long term, as new technology spreads throughout the economy and transforms other, larger sectors. For example, while the semiconductor industry alone doesn't account for much U.S. employment, the computer revolution has fueled the growth of other industries such as retail and finance; similarly, the clean-technology business by itself doesn't employ many people, but its developments could transform a big sector such as energy, creating new business models and new jobs.

4. Higher productivity -- when an economy produces more goods and services per worker -- kills jobs.

Not so. While productivity growth means that individual companies may need fewer employees in the short term, it spurs long-term gains in the economy as a whole. Since the industrial revolution, increasing worker productivity has brought rising incomes, higher profits and lower prices. These forces stimulate demand for consumer goods and services and for new plants and equipment -- fostering, in turn, industry expansion and job creation.

Take cellphones. Even 15 years ago, they were big, unwieldy, expensive and worked only in limited coverage areas. But as new technologies enabled workers to produce phones and provide service more cheaply, the industry took off. Cellphones are now ubiquitous, and this has created jobs not just among phonemakers but also among retailers, service providers and a new industry of developing and selling applications for cellphones.

5. Increasing exports will revive manufacturing employment.

Maybe for some companies in some industries, but not for the economy overall. While it's painful to accept, reducing unemployment is not mainly about regaining the jobs that have been lost. Sure, rising exports will cause some factories to scale up again, and many laid-off workers will be called back. But most new job growth will come from other sectors.

History shows that recessions -- particularly those following a financial crisis -- accelerate the growth or decline already underway in industries. In this recession, for example, the auto, financial services and residential real estate industries have contracted significantly and won't regain their peak employment anytime soon.

An increase in exports may stem -- but will not reverse -- the multidecade decline in manufacturing employment. In today's developed economies, net growth in new jobs doesn't come from manufacturing; it comes from service industries. Fortunately, boosting exports creates jobs in supporting service industries, such as design, trucking, shipping and logistics.

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