Transportation TIP List: Week of August 31st, 2015

As we turn the calendar to September and enjoy the last summer holiday, this week’s TIP List has us focusing on the latest trends in supply chain and logistics. From manufacturing and security to the success of future leaders and optimizing performance, we have the must read links below. Read on for all the great info!

  • Truckload Contract Prices are Rising, Report Says: Shippers are paying more to lock in trucking capacity as they anticipate a let-up in the driver shortage will prove temporary, analysts say. In a survey of 25 trucking companies, Stifel found that prices in contracts that lock in service for up to a year are up by low- to mid-single digit percentage points from a year ago.
  •  U.S. Intermodal Hit 10 Week-High as Train Speeds Improve: U.S. intermodal volumes have increased to their highest level in more than two months. U.S. intermodal traffic for the week ending Aug. 15 rose 2.3 percent year-over-year to 276,443 units, according to the Association of American Railroads, the largest rail lobby in the U.S. That’s the most intermodal containers on rail since the week of June 13, when railways moved 283,363 units.
  •  Labels Aside, Companies Need Transparent Supply Chains: Officially called the Safe and Accurate Food Labeling Act, the bill is the result of a growing push by consumers for more information about the contents of the products they buy. The U.S. House of Representatives recently passed legislation that would remove state-level authority to require companies to show when a food product contains genetically-modified organisms, or GMOs.

What transportation and supply chain topics are you reading up on this week?

Have questions, comments or other important TIP list topics? We’d love to hear them!

Transportation TIP List: Week of August 24th, 2015

As we near the end of the month of August and summer season, this week’s TIP list is looking to the future! This latest edition has a common theme – the supply chain. From manufacturing and security to the success of future leaders and optimizing performance, we have the full supply chain scoop below. Read on for all the great info!

  • Truck Freight Demand Surges at Fastest Rate Since November 2013: Trucking activity rose to its second-highest level on record in July 2015, as a strengthening economy increased the amount of freight on the road. The amount of cargo hauled by U.S. truckers rose 2.8% in the latest reading of the American Trucking Associations’ monthly index. It was the biggest monthly gain since November 2013.
  •  Shippers say they’re moving production back to U.S., but stats don’t reflect: After decades of moving operations overseas, executives at U.S. manufacturing and distribution firms say they’re coming home, or at least closer to home via Mexico. Yet in spite of the anticipation over so-called “near-sourcing” and promises that U.S. manufacturers want to move operations back to U.S. soil, the country continues to post net job losses, down 300,000 so far in 2015 alone
  • Success Factors for the Next Generation of Supply Chain Leaders: The APICS Supply Chain Council released findings from its latest industry report, which examines critical success factors of a supply chain leader, including his or her attributes, leadership style, and ability to formally and informally influence a multitude of stakeholders.
  • Supply Chain Security: Playing It Safe: Protecting today’s corporate supply chain is a complex challenge. There are more than 20 million conveyances arriving to the United States each year, and the number of times these shipments are handled both internationally and domestically, create many opportunities for illegal activity to occur.
  • Is the Information Supply Chain Just Another Supply Chain?: The likes of Walmart and General Motors have spent decades fine tuning their supply chains to speed up the arrival of goods to market, but at most companies, valuable data still sits parked in siloed IT systems and not available to other departments or team members. What can data managers learn from well-oiled physical supply chains? A lot.
  • External Insights Critical to Effective Supply Chain Performance: Traditional forecasting models that leverage historical data to predict future performance are the tools used by most supply chain executives to plan critical functions, yet these predictions are frequently inaccurate. In fact, research shows that most quarterly forecasts are off by 13 percent—meaning that supply chain managers are basing their decisions for ordering materials and scheduling distribution on erroneous projections.
  • Consumer Prices Rise at the Slowest Pace in Three Months: The cost of living in the United States grew in July at the slowest pace in three months, casting doubt on how quickly inflation will return toward the Federal Reserve’s goal. The consumer price index climbed 0.1% after a 0.3% gain the month before, a Labor Department report showed Aug. 19.

How are these trends affecting your supply chain operations?

Be sure to check back next week for the latest TIP list!

Improve Your Transportation Management Program with Lean Six Sigma

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By: George Abernathy, President & Chief Commercial Officer, Transplace

Lean Six Sigma (LSS) is a quality initiative program that provides value to both customers and employees. LSS provides an opportunity for employees to be able to obtain a skill set and training in an area that brings value to their company and customers through the elimination of waste and error.

Lean Six Sigma’s Role in Transportation Management Today

There has been a change in how the marketplace thinks about quality in the supply chain in recent years. Lean Six Sigma is a program that combines the best of Lean, which focuses on the reduction of waste, and best of Six Sigma, which focuses on reducing error. In the supply chain, especially in transportation management, there is a real need for elimination of waste and to instill more efficient processes.

By looking at both internal and external projects and opportunities, you can uncover many areas to apply LSS principles when it comes to transportation management. For example, LSS principles can:

  • Eliminate errors and drive significant savings when it comes to streamlining internal processes. Companies are able to increase their volume of business without requiring more resources.
  • Help companies cut down on external waste for their customers by reducing extra expenses and driving savings.

There are multiple touch points between businesses and customers where waste and error can be eliminated. In transportation management, some of the most common places to look for reducing waste is in the procurement and operations process, establishment and execution of routing guides, and in reporting.

Getting Started with Lean Six Sigma

Look to work with a provider that has a strong LSS program in place that you can take advantage of. Transplace, for example, provides a point of entry for customers who may not have their own quality initiative programs or training within their own transportation management group. We invite our customers, at no cost, to train among our own employees going through the program. Customers are able to observe quality initiatives firsthand at Transplace and see how LSS can be effective, while earning their own LSS certifications.

You can learn more about the impact Lean Six Sigma can have on transportation management by viewing the video below.

 

Transportation TIP List: Week of August 17th, 2015

It’s mid-August and while summer might be winding down, as far as the transportation and logistics industry is concerned, things are continuing to heat up. Trucking, oil prices and the Panama Canal are all hot topics, and this week’s TIP List has the latest and greatest insight to keep you in the know. Read on for all the details!

  •  Panama Canal to Place Limits on Shipping Due to El Niño Drought: A drought caused by the El Niño weather system has forced the Panama Canal to limit how deeply ships are immersed as they pass through the waterway. The Panama Canal Authority announced in a shipping advisory that the canal’s lower water levels mean a ship’s maximum draft will drop from 39.5 feet to 39 feet on September 8.
  • Tightening Capacity Raises U.S. Distribution Center Rents: Surging demand for U.S. industrial real estate is outstripping demand, pushing rents to near pre-recession levels and attracting speculative investment in new facilities. Because construction of distribution centers and warehouses isn’t keeping pace with demand, companies that need space can expect an almost across-the-board increase in rent.
  • Manufacturing Productivity Rebounded Modestly in the Second Quarter: Labor productivity increased 2.5 percent and output rose 1.5 percent in the second quarter, with hours worked decreasing by 1.0 percent. This resulted in unit labor costs falling by 2.3 percent, helping to make the sector more competitive globally and improving upon the weaker-than-desired performance seen at the beginning of the year.
  • Oil Tumbles to Six-Year Low on OPEC Output, Yuan Move: Crude closed at the lowest level in more than six years in New York as OPEC production climbed while China’s devaluation of the yuan bolstered concern that the world’s second-biggest economy will slow. Additionally, the Organization of Petroleum Exporting Countries raised output by 100,700 barrels a day to 31.5 million last month, the most since June 2012.
  • To Share or Not to Share? It’s Not Even a Question!: At the heart of everything omni-channel is inventory. The customer needs to be able to get the merchandise they want, when they want it and through their channel of choice. In order to achieve this, there has to be inventory visibility across channels so that stores, warehouses, and distribution centers can see real-time inventory levels as part of the order fulfillment process.

How are current trends like oil prices and omni-channel impacting your operations?  Let us know in the comments below. And, don’t forget to check back next week for the latest TIP list!

Transportation TIP List: Week of August 10th, 2015

Summer is winding down and it’s almost back to school time – and this week’s TIP List has us studying a variety of interesting subjects, from legislation and infrastructure to upcoming trends in technology. Keep reading to review these timely industry topics that you don’t want to fall behind on!

  • ATA Welcomes Senate Passage of Long-Term Highway Bill: Following the Senate’s passage of a long-term highway bill last Thursday, the, American Trucking Associations (ATA) congratulated senators for approving a highway reauthorization bill that it says represents a significant step toward addressing the nation’s transportation infrastructure needs.
  • ELD Mandate Update: The Electronic Logging Device (ELD) mandate is in the last stages of being released as a final regulation. As of the last published calendar, it is now with the Office of the Secretary of Transportation for review, and will go next to the Office of Management and Budget for the last major hurdle before being released.
  • Egypt Prepares to Inaugurate Expanded Suez Canal: An $8.5 billion expansion of the Suez Canal, which has been promoted by the government as the “rebirth of Egypt,” has stirred patriotic fervor in Egypt and salvaged a national psyche bruised by simmering political divisions and an increasingly sophisticated Islamist insurgency.
  • 4 Improvements Technology Brings to the Supply Chain: In the days where supply chain analytics were left to handwritten tallies or Microsoft Excel spreadsheets, the supply chain was hindered by lack of information. However, today’s technology tools, especially cloud-based tools, are bringing some major boons to the supply chain.

Have questions, comments or other important TIP list topics? We’d love to hear them!

What transportation topics are you studying up on this week?

Q2 Logistics Review

By: Tom Sanderson, CEO, Transplace

In the second quarter of 2015 there were some interesting activities across different economic sectors worth highlighting. In last quarter’s recap blog, I shared thoughts on capacity and fuel prices. Topics highlighted below are based on economic data driving freight demand, as well as legislative and regulatory issues affecting freight transportation. Finally, see what I’m anticipating for Q3. Now, let’s get on to recapping this quarter.

 

Capacity Remains Steady, Fuel Rebounds

As stated in my last recap, we normally see capacity start to tighten up in Q2 as freight volumes grow, but that’s not been the case this year. According to Morgan Stanley’s flatbed freight index, flatbed capacity is much more readily available for this time of year and actually remains very similar to capacity-demand balance in 2013. Refrigerated capacity is also more available even though in the beginning of 2015 it was significantly tighter than normal. Throughout Q2, that tightness eased up especially compared to 2014 levels.

It’s much the same for dry van capacity. In fact, we see van capacity much more readily available when compared to last year, and we haven’t seen easy capacity levels like this since Q2 of 2009. Why the available capacity? There are three key factors: sluggish freight growth in a sluggish economy, the hours-of-service (HOS) restart rollback and actual capacity additions by carriers. We anticipate only modest tightening of van capacity as we move into peak fall shipping and don’t expect significant shortfalls until 2016.

This quarter also saw diesel continue to fall with only a few weeks of price increases during the quarter. In early April, diesel hit a five-year low, but started rebounding and by May prices had increased for five straight weeks before resuming their fall. Diesel prices are near 2010 levels and 26% below prior-year levels. The Energy Information Administration (EIA) predicts a $2.86 per gallon average for this year and $3.06 for 2016, but that seems high to us.

Retail Sales Flat While Housing Starts, Auto Sales and Manufacturing Growth Shows Promise

Q2 retail sales were disappointing following Q1 numbers. Sluggish retail sales were especially disappointing given lower gas prices – consumers weren’t spending their gas savings on other items. For the second quarter sales grew at only 1.7% from 2014 Q2.

Housing starts bounced back this quarter. April saw housing starts at a post-recession high of 1,135k, the first month above the 1.1 million unit pace since November 2013 and the highest monthly total since November 2007. Even though numbers were down in May, housing starts were back above the 1.1 million unit pace in June.

April auto sales were the best since 2006 despite dropping from March, which was the first month to exceed the 17 million unit pace since November. Q2 finished exceptionally strong with sales above a 17 million-unit pace for the first time in a decade.

Despite deceleration in manufacturing growth earlier this quarter, we saw manufacturing growth strengthen in May and June. After six straight months of declining or flat performance, the Institute of Supply Management (ISM) reported that the Purchasing Managers’ Index (PMI) increased to 52.8 in May, and 53.5 in June. We have yet to see manufacturing growth hit the pace experienced for most of 2014.

Rail Grows, But Still Lags Behind Truck in U.S.-Mexico Cross-Border Freight Transportation

According to the U.S. Department of Transportation Bureau of Transportation Statistics, while the flow of trucks and rail containers across the U.S.-Mexico border is experiencing growth, it’s not happening at a very fast pace. Rail container crossings grow faster when the economy is strong, and shrink when the economy is weak. Since 1999, truck crossings have experienced growth by more than 10% year-over-year only one time while rail growth has exceeded 10% growth in 7 of these years.

Ultimately, intermodal will grow at a faster pace than truck freight due to the long haul nature of cross-border freight, the shortage of long haul truck drivers, customs clearance advantages and the overall economic advantage of rail over truck for long haul transportation.

Q3 Forecasts & Expectations

In Q3, unfortunately there is not much of an expectation that we will see the economy pick up steam. Fuel prices will remain low but that does not seem to translate into additional consumer spending in other areas. The strength of the U.S. dollar is harming exports, which is putting pressure on manufacturing. Despite the very low cost of natural gas, which is a big boost to manufacturing competitiveness, growth is being dampened by the high value of the dollar and sluggish retail sales. When you add it all up, it appears that truck capacity will remain generally available throughout Q3.

On the regulatory front, we have the 34th extension of the highway bill, this one is for only three months and for one of those months Congress is on vacation. So towards the end of the quarter, we will either need another extension or a longer-term highway bill. Expect another extension. While there may be some regulatory rules published in the quarter, particularly for electronic logging devices, there will be a multi-year phase in period so there will be no short-term impact.

If you’re interested in keeping up with any of the topics covered above then I encourage you to check out my blog or follow me on Twitter: @TomSandersonCEO

Did Q2 meet expectations or were there some surprises? What will you be watching closely next quarter?

 

5 Most Important Leadership Responsibilities

At this year’s Shipper Symposium, leadership principles and best practices were shared with attendees including relevant guidance for helping enhance management expertise professionally and personally. Leadership is what makes a company great over the long term. Effective business leaders influence and inspire to create a successful business culture that allows team members to think innovatively and become peak performers.

What are the keys to success? Check out the below infographic to learn about the 5 critical leadership responsibilities.

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To learn more about Transplace leadership, visit https://www.transplace.com/about/leadership/

What leadership tactics have proven most successful for your business?

BIG NEWS: We’re Introducing our New Weekly Transportation TIP List!

Do you want to be in the know on the latest transportation industry insights and important logistics topics? Then you’ve definitely come to the right place! For those who are already familiar with our monthly TIP List, you know it’s a handy list of articles showcasing current hot topics in transportation. Due to popular demand, we’ll now be updating you on a weekly basis!

This week’s TIP List includes a number of news items concerning recent legislative and economic developments that are affecting the North American transportation community. We hope you find value in this weekly blog post. You can catch what’s trending this week below and read the full article by clicking on any of the links.

  • Senate Signs Off on DRIVE Act but Long-Term Obstacles Linger: The Senate has signed off on a six-year surface transportation authorization along with a three-month extension for surface transportation efforts that was recently voted on and approved by the House, passing by a 65-34 margin. But while it provides some optimism for a new long-term bill that is badly needed to provide some stability and overdue attention for national and state transportation infrastructure-related projects, it is not likely to go anywhere in the short term.
  • East Coast Ports Face Warehouse Crunch: East Coast ports are falling behind on supplying warehouse space to meet booming container traffic. The expansion of the Panama Canal is reshaping seaports up and down the U.S. East Coast, but data shows that East Coast ports aren’t meeting demand in one key area: the supply of warehouse space at or around marine terminals.
  • Tonnage Growth Still Tepid: Truck tonnage continued to grow at a tepid pace in June, rising 1.8% from a year earlier as factory production and retail sales stalled and inventories remained high. Last month’s gain narrowly outpaced May’s 1.5% year-over-year growth, which was the lowest since February 2013, when it fell 4.3%.
  • U.S. GDP grew 2.3% in Q2 2015: United States gross domestic product (GDP) expanded at an annual rate of 2.3 percent in the second quarter of 2015. Commerce attributed the acceleration in U.S. economic growth to positive consumer, state and local government spending; increased exports; and a deceleration of imports, which were partly offset by federal government spending, private inventory investment and nonresidential fixed investment.

Be sure to bookmark the blog to come back to read next week’s TIP List. If you’re already a subscriber to Logistically Speaking, you’ll be notified of a new post just like all other blog posts. If you’re interested in just receiving the weekly TIP List, you can do so by clicking here.

Let us know what you think! Feel free to submit your questions, comments or other important TIP List topics our way!

What’s on your TIP List this week? Was there anything important we missed?

A Holistic Roadmap for Uncovering Your Transportation Network Savings

Shippers are continuously looking for ways to reduce their transportation costs. Yet, transportation doesn’t lack when it comes to complexity with its many moving parts. Add in the need for smart resources, strong industry experience and quality skills needed to ensure that transportation networks are optimized, and inefficiencies can easily creep in. By looking holistically at a transportation network across an enterprise, shippers may find that unexplored areas can bring about unexpected savings. Likewise, inefficiencies through common practices may also be brought to light and therefore given the opportunity to be corrected and improved.

Unsure where to start? Here are a few steps a shipper can take to begin to maximizing transportation operation efficiencies, and possibly uncover potential cost savings:

  • Gain a complete view of your transportation management: Take a step back and holistically view your enterprise-wide network of freight flows (inbound, outbound and interfacility) for all modes. You may elect to opt-out on certain modes in the optimization scenarios, but get a clear view of the big picture first, before making that decision.
  • Switching the focus: Optimizing transportation networks doesn’t mean controlling every piece of freight on every lane. Rather it is aimed at the best overall solution for improving supply chain performance and reducing total landed cost. Often this may mean actively and continuously collaborating with vendors and suppliers to pick the right mode and carriers.
  • Tune into “Expressive Competition”: Superior operating performance, service and cost characteristics are achieved by mapping the flows of freight you can identify in your own network and overlaying that with available carrier capacity. The only way this can effectively and efficiently be done is through “Expressive Competition,” which is achieved by exposing your freight flows to the population of carriers with available capacity. Those carriers will tell you – by their selling behavior – what lanes and volumes that fit into their networks. This amplifies operating efficiency and reduces costs for everyone.
  • Turn data into information: Compile a baseline of what your costs are “as-is” today, and then what they could be in the “to-be” model through redesigning and restructuring the network. This is the core of transportation portfolio management.

In addition, avoid common pitfalls such as sub-optimizing specific modes of transportation, which can cause missed opportunities for savings. Lastly, upper management should take into consideration the overall network impact of the margin versus the impact of sales which, pending the commodity, could easily double or triple.

Watch the video below to hear Brooks Bentz, President of Supply Chain Consulting at Transplace, expand on the steps above and how to take a more nuanced perspective when viewing the big picture of transportation management to maximize shipper savings.

Click  here to learn more about Transplace Supply Chain Consulting and managing transportation networks.

Which factors do you find most challenging in optimizing your supply chain network?

Think Holistically About Your Transportation Network

If you’re looking to the future and strategizing on how to run a more efficient, cost-effective transportation network, the key is to think holistically. Keeping these six steps in mind will help. 

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By following these basic steps, you can wring the maximum value and performance from the network you must operate in meeting customer and corporate demands. Getting it right at the outset is commendable—maintaining it is vital.

For more information on building a better transportation network, visit here.