Logistics Management Solutions Blog

They say necessity is the mother of invention and I know this to be true.  Necessity is what brought us to develop and launch our own transportation management system (TMS), TOTAL, back in 2001.  And, eleven years later, necessity is what drives the evolution of this system, which continues to be recognized for its innovation.

We just learned that LMS has – for the ninth consecutive year – earned the title of “Top 100 IT Logistics Provider” by Inbound Logistics magazine.

Every April, we compete with hundreds of companies to earn a spot on this list.  Inbound editors use questionnaires, personal interviews and other research to select award recipients.  The complete list can be found here.

What’s interesting is that LMS did not begin as a technology company.  We were a 3PL specializing in logistics execution; our staff members directed freight movements using clients’ TMS products.  However, in doing so, we discovered something – there wasn’t a single system that could do what our clients needed it to do.  We then set off to find and buy the system we envisioned, but it didn’t exist.

So we built it ourselves.

We hired software engineers and worked with them closely, very closely.  You see, we had come to believe that most TMS products were developed by talented developers who had no working knowledge of the supply chain industry.  An effective TMS had to manage transportation operations in the “real world.”

The system also had to be financially viable.  The products we encountered entailed huge costs and lengthy implementations.  Our clients needed a system that could produce a quick return on investment (ROI).  And, TOTAL is engineered to produce an ROI within 90 days.  It was – and continues to be – an unprecedented standard in the industry.

When LMS first made this list, it was exciting.  However, it’s one thing to get on a list like this and another to stay on it, especially when you consider the pace of technology.  In 2001 we didn’t just launch a system; we made a commitment to technology.  We hired a full-time staff of talented software engineers so we could continuously improve our product and meet clients’ evolving needs.

This is why we repeatedly appear on the Top 100 list.  According to Felecia Stratton, editor of Inbound Logistics, LMS “continues to be flexible and responsive, anticipating customers’ evolving needs.”

TOTAL was designed to manage shipping operations from planning to execution to tracking and tracing.  But, our clients needed more.  Today the system features a business intelligence solution that gives users an endless array of data vantage points that can lead to operational improvements.

And that’s just one example.  Our technology has evolved and will continue to evolve because, for our clients, it’s a necessity.

Four years ago we ran one of my favorite ads, the “Horse and Buggy” ad.  In 2008 fuel prices were climbing and diesel peaked at $4.207/gallon on August 18.  Shippers, carriers, consumers were struggling with rising fuel charges and everyone was looking for ways to cut transportation costs.

It may be time to run the ad again.

This week the Department of Energy (DOE) announced that the average price of diesel rose .5 cents to $4.147 a gallon, which is the highest diesel has climbed since that summer day in 2008.  I believe it won’t be long until we reach the $4.207/gallon price and, more than likely, surpass it.  This is the ninth straight increase we’ve seen, and in the past three months the average price for a gallon of diesel has risen 36.4 cents.

Fuel costs are on an upward trajectory and shippers need to get resourceful, creative.  Of course horse-drawn transportation hasn’t been a viable option since the 1800s, but the point is made.  My advice: Don’t lament the situation, leverage it.

Now is the perfect opportunity to step back and really dig into your freight operations.  Fuel costs are beyond our control, so we must control what we can.  When was the last time you explored opportunities for freight optimization?  Shipment aggregation, consolidation, co-loading, continuous move routing, mode-shifting.  Even a small reduction in deadhead miles will contribute to your bottom line.

Maybe you don’t think these practices are an option for you, but odds are in your favor.  Over the years we’ve worked with countless shippers whom have been surprised to discover that yes, freight optimization can work for them.  And, what’s more, they don’t have to make trade-offs between cost reduction and customer satisfaction.

LMS has published a white paper that explores optimization tactics in detail – “Ten Best Practices for Motor Freight Management.”  It’s a good place to start and it’s free; you can request it via this link.  Better yet, we can perform a free analysis of your transportation data.  Using our proprietary technology, we will quickly review your freight activities to identify viable optimization opportunities within your network.  If you are interested, contact us (info@lmslogistics.com).

Regardless of how you choose to go about your research, know that it is an important exercise that can help you mitigate the effects of rising fuel costs.  Chances are great that your efforts will lead you to viable cost-saving initiatives, and, chances are, none of them will involve horses.

Will 2012 be the year for intermodal?

All signs point to yes.

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

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

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

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

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

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

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

As of January 1, our roadways will be a little safer.

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

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

Enter the new ban.

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

Who does it apply to?

• Interstate commercial truck and bus drivers
• All hazmat drivers

What does it ban, allow?

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

What are the penalties?

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

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

What’s going on in the trucking industry is a bit unusual.

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

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

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

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

Less-than-truckload:

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

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

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

Truckload:

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

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