Trucking is Sure Confusing These Days

Trucking is sure confusing these days isn’t it? Chew on these facts for a minute:

1.      The trucking industry is officially in a recession, according to data tracked by ACT Research and reported by FreightWaves.

2.      Freight volume in 2019 has been strong, but has now started to weaken below 2016-1017 numbers. Spot rates are down double digits and contract rates are being converted to spot rates by shippers faster than you can imagine.

3.      Is there a driver shortage as we have been told our whole careers? U.S. unemployment is at 3.7%. A record number of Class 8 trucks were sold in 2018 and so far in 2019, the number of cancellations is below average. So, I guess this means there is no driver shortage?

4.      I sent this question out to several of my contacts this morning, “There have been several carriers that have gone out of business in the news in the past couple weeks. Curious as to your thoughts? Over expansion on the carrier communities part causing unrealistic rate softness or what exactly?” Whether you agree or disagree, many publicly traded shippers missed their numbers last year due to transportation costs. Knowing that the trucking economy is in recession and that there are too many trucks for even a robust U.S. economy means that shippers are going to keep the pressure on to lower rates so that they do not have to raise prices to their customers.

5.      Tariffs, weather, and other things have impacted the transportation economy negatively this year.

6.      The most recent Cass Freight Index (June 2019) indicates that, “As volumes of chemical shipments have lost momentum, our concerns of the global slowdown spreading to the U.S., and the trade dispute reaching a ‘point of no return’ from an economic perspective, grow.”

Like I said, it sure is confusing!

So, freight brokerage, how do you handle these facts?

From my perspective:

1.      Stay the course with your marketing and contacting of your prospective customers. Continue to do things that show them your knowledge and passion for the industry while understanding that they have an ample supply of trucks at their disposal. Make sure you have a growth strategy for acquiring customers. There are a lot of shippers who move smaller volumes that are not attractive to larger fleets. Find them.

2.      Cover your customers freight and maintain an unblemished track record of doing so. In an industry that has a reputation of being unreliable, be the shining star of reliability.

3.      Do not cut corners when you are vetting carriers because you are trying to find someone ‘cheaper’. Bad idea. Really bad.

4.      Goldman Sachs reported earlier this year that 23% of all loads moved in the U.S. were handled by freight brokerages and 3PL’s. With most of those smaller fleets looking to the spot market rather than contractual freight, “shipper behavior” is changing to tap into those smaller fleets on a more regular basis. Instead of using them for surge capacity, more consistent use of those fleets is smoothing out volatile spot freight rates. Freight brokerages live in this environment.

Keep working!

-Russ

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The Next Big Thing in Transportation is SERVICE!

As transportation professionals, all of us have been through the roller coaster ride called cyclicality many times. Trucking is famous for it. The economy gets hot. Truckers buy trucks. Truckers buy too many trucks. The economy cools. Capacity goes from very tight to not tight at all. Rates rise. Rates fall. And the cycle begins again. We’re experiencing this now as 2018’s monster rates have fallen to 2019’s rates that seem more like the 1980’s. For those of you who are more seasoned, like me, you’ve seen it before, and you’ll see it again. For those of you who are younger, get used to it. Because the trucking industry is so fragmented, it’s how this industry has always worked.

 

In my career I have always paid attention to the pendulum.

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Shippers have always tended to swing between low cost and best service. For years I worked for a carrier that was “best service”. But gradually that carrier began to price themselves too high, valuing their service more than what the shipper thought it was worth. Shippers will accept a certain level of failure if the price is right. Likewise, as in today’s market, prices escalated way too much in 2018 to the point that publicly traded companies had to footnote their missed earnings with “transportation costs”. To my knowledge that has never happened.

Truckers also always seem to forget that the cyclicality of this industry is something that never changes. The example I was always given was that in a tight market a shipper tells 10 carriers they have a load to cover and all 10 carriers buy a truck because all their other trucks have freight on them. That’s how capacity goes from tight to not tight at all. It’s how new carriers with truck payments die a quick death and how smart carriers with no payments park their trucks against the fence in times like we are now experiencing.

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So, the industry ebbs and flows between price and service. We have just swung wildly to the right to low price. Depending on whether you’re a spot market carrier, a contract carrier, or a broker, you’ve likely seen prices drop from a little bit to a lot.

Where do we go from here? Pretty quickly the pendulum will begin the inevitable swing to service. For brokers, low prices often can mean taking chances on lower cost carriers. With lower cost, sometimes comes lower quality service. Not always, but sometimes. For asset-based carriers, the high truck payment guys will quickly realize they can’t survive at the present price structure so they will begin to disappear. The well capitalized carriers who have parked trucks and are known for service will wait it out. Things like service reporting and FourKites and Macropoint will begin to be talked about again.

If you haven’t gotten your customer service shined up, now would be a great time to get that done. Your customers are about to demand it. They won’t tolerate bad service even with the low price. And with that, the pendulum will again begin to swing.

-Russ

The Golden Rule, Relationships, and Other Meanderings

The Golden Rule – Do unto others as you would have them do unto you. Its origins date back to the Bible in Matthew 7:12 “So in everything, do to others what you would have them do to you, for this sums up the Law and the Prophets”.  It’s something that parents generally teach their children. It’s something that we who employ others tell our employees. 

In transportation, it doesn’t matter whether you are talking to the driver, dispatcher, procurement manager, supervisor, appointment clerk, supply chain manager, transportation manager or owner. Use professionalism and respect. Choose your words well and don’t leave room for regret once you say or do something. Whether used in a personal or professional setting, the golden rule is best interpreted as saying: “Treat others only as you consent to being treated in the same situation.” To apply it, you’d imagine yourself on the receiving end of the action in the exact place of the other person (which includes having the other person’s likes and dislikes). If you act in a given way toward another, and yet are unwilling to be treated that way in the same circumstances, then you violate the rule.

However, in our diverse, modern world, it can be less than ideal. By assuming other people should be treated the way I want to be treated, it imposes my preferences and values on those around me. Wouldn’t a better rule be “One should treat others as they want to be treated”?

I have had the pleasure to be in transportation sales since the manufacturer’s guide was invented. That, for those of you under the age of say 40, was a paper hardbound book, published by state, that was to include every manufacturer in that state organized by city. That’s how we did sales calls. You got the book and you started looking people up and calling them. Everyone knew the purpose of my call was to solicit business. Whether it happened right away or in the future was all a matter of the needs of the prospective customer. Even today, with all the super cool gadgets like LinkedIn and Zoom and all the others I am not aware, if your timing is bad, you’ll not be getting any business.

The biggest difference I see today, versus back in the day, is that today, people tell me to develop a “relationship” before soliciting my business. This confuses me. I’m a transportation sales person and you are a person who spends money on transportation. If I send you a LinkedIn request, what would you suppose is the purpose of that request? From my perspective, it is for the two of us to explore working together. If one day we do that, then you’ll learn about my wife and my kids and my hobbies etc.… I mean, I’ve got what, 15 seconds on the phone to make a good impression? If you answer. The LinkedIn world today wants to reverse that. I see lengthy articles and videos saying don’t ask me out until we get to know each other. I’m lost as to how that works. Why is that?

First, it takes two to tango. If you want a relationship, you need to reply to an email or answer the phone. I’m not sure how we can develop a relationship if one keeps trying and one doesn’t try at all. One day last week I got five emails from five different people and not one of them included the person’s phone number. I’ve emailed some of those people back and they tell me they only communicate via email. My guess is they are the same person you meet on the street who won’t make eye contact. What in the world! Does the President of the company know they have employees with business cards and no phone numbers?

Second, I tell people on LinkedIn not to add me unless you look at my profile and think we have something in common that would allow us to have a conversation. My guess is that 75% (no scientific evidence here, just my gut) of the Connections on LinkedIn are nothing more than two people who can list one another as a connection. They have never spoke and worse yet, may have never looked at each other’s profile. Most of my LinkedIn connections, once we connected, have never responded to my messages, emails or phone calls. Whether I was congratulating them on an anniversary, a promotion, or their sports team winning the Championship.                    Cricket.                                       Cricket.

Back to my Golden Rule premise. I’ve said this for too long. Society today is a throwaway society. Anything you own breaks; you throw it away and get a new one. The repair shop is obsolete. On the business side of the world it applies to suppliers, vendors, and service providers. On the personal side it applies to spouses and friends. You made me mad. I’ll find a new one. The repair shop here is obsolete as well. I look at a resume today and I see someone has had seven jobs in 18 months and I think that person cannot hold a job. The digital marketing guru, Gary Vaynerchuk, tells his followers just the opposite. The employer didn’t do what they were supposed to do, so the employee was right to leave. It’s just a different way of thinking. A different way of viewing the world.

I would like to think that I treat my wife and my friends as I like to be treated. I would like to think that I treat the people who work for our company the same way. I know I treat our carriers and customers that way. 

But I think we can all do a better job. Could we actually talk sometime?

Russ

Going from Good to Great!

Good to Great – what does it mean to you?

What do you personally do to go from good to great?

What do you NOT do to go from good to great?

I am a hypothetical bus driver. The bus, my company, is at a standstill, and it’s my job to get it going. I have to decide where I am going, how I am going to get there, and who’s going with me.

Most people assume that great business owners immediately start the journey by announcing to the people on the bus where they’re going—by setting a new direction or by articulating a fresh corporate vision.

In fact, leaders of companies that go from good to great do not start with “where” but with “who.” They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats. And they stick with that discipline—first the people, then the direction—no matter how dire the circumstances. Take David Maxwell’s bus ride. When he became CEO of Fannie Mae, the company was losing $1 million every business day. The board desperately wanted to know what Maxwell was going to do to rescue the company.

Maxwell responded to the “what” question the same way that all good-to-great leaders do: He told them, That’s the wrong first question. To decide where to drive the bus before you have the right people on the bus, and the wrong people off the bus, is absolutely the wrong approach.

Maxwell told his management team that there would only be seats on the bus for A-level people who were willing to put out A-plus effort. He interviewed every member of the team. He told them all the same thing: It was going to be a tough ride, a very demanding trip. If they didn’t want to go, fine; just say so. Now’s the time to get off the bus, he said. No questions asked, no recriminations. In all, 14 of 26 executives got off the bus. They were replaced by some of the best, smartest, and hardest-working executives in the world of finance.

With the right people on the bus, in the right seats, Maxwell then turned his full attention to the “what” question. He and his team took Fannie Mae from losing $1 million a day at the start of his tenure to earning $4 million a day at the end.

When it comes to getting started, good-to-great leaders understand three simple truths. First, if you begin with “who,” you can more easily adapt to a fast-changing world. If people get on your bus because of where they think it’s going, you’ll be in trouble when you get 10 miles down the road and discover that you need to change direction because the world has changed. But if people board the bus principally because of all the other great people on the bus, you’ll be much faster and smarter in responding to changing conditions. Second, if you have the right people on your bus, you don’t need to worry about motivating them. The right people are self-motivated: Nothing beats being part of a team that is expected to produce great results. And third, if you have the wrong people on the bus, nothing else matters. You may be headed in the right direction, but you still won’t achieve greatness. Great vision with mediocre people still produces mediocre results.

-Russ