The length of haul on full truckload shipments within the United States has been shifting down for years. The trend became particularly clear to me during some freight bids with which I was involved last year. During the course of these bids, a number of the major U.S. national truckload carriers outlined their companies’ regional truckload strategies and were very clear about their objective to build their regional businesses.

The move from national (e.g. greater than 500 miles) to regional truckload shipping (e.g. less than 500 miles) was precipitated by a number of factors. The freight recession that began in 2006 has resulted in fewer long haul truckload shipments. As fuel costs began to increase, it became very punishing financially to incur out of route miles to chase backhaul freight, particularly when these miles were not all producing revenue. In addition, the intermodal option became more attractive on longer distances, when you consider line haul and fuel costs. As fuel costs were escalating, supply chain managers sought to shorten their supply chain to reduce miles, inventory costs and freight costs.

In 2009, the sharp downturn in shipping volumes is giving this movement added momentum. The national truckload carriers are reshaping their business strategies to address the current market realities. These carriers are not abandoning the national markets but revising their long haul strategies. As an example, Werner, in its current earnings report, notes that it “is deemphasizing the low asset return, solo driver solution” while seeking “to grow several other customer focused solutions for this market, such as using team drivers, engineered networks of relay trucks, third party brokerage carriers, power only with trucks provided by third party carriers and intermodal.”

Schneider National has also been rolling out its regional truckload business plan. On the heels of what the company said was the successful launch of a regional service in the West last January, the trucking company said it would offer regional service in the South-Central United States. Schneider first launched its regional service to western U.S. customers in January, providing service to a seven-state area: Arizona, California, Colorado, Nevada, Oregon, Utah and Washington. The new South-Central regional service will add nine states to that list: Texas, Oklahoma, Kansas, Missouri, Arkansas, Louisiana, Tennessee, Mississippi and Alabama.

Regional terminals will be located in Dallas, Houston and Memphis and will serve as hubs for customer service representatives and drivers who are dedicated solely to this region of the country. Regional drivers develop regular driving routes, allowing them more time at home and consistent workloads. Heartland Express, another medium distance carrier opened its 10th regional operation in Dallas.

What can we expect in the future? More of the same. Keith McCoy, Director of Marketing for Prime Inc., a refrigerated truckload carrier, expects retailers to continue to shorten their supply chains by forcing manufacturers to move their distribution centres closer to reduce carrying costs. Higher interest rates and rising fuel costs will likely be major factors in the future. Prime has opened four “mini” centres to address these shifts and has plans to do more.

The shrinking length of haul is apparent from the trucking company results reported in the first quarter. Werner’s average length of haul dropped 13.5% to 469 miles while USA truck reported an 11.2% reduction to 651 miles.

In Canada, the market dynamics are somewhat different. Certain industry sectors (e.g. automotive, pulp and paper) are very challenged at this time, with a quick recovery not in sight. The severe downturn in the U.S. economy has resulted in significant declines in cross-border truckload movements. As a result, Canadian carriers are seeking out Canadian markets that have growth and profit potential. As an example, XTL, a central Canada based carrier that historically derived over fifty percent of revenues from cross-border freight, outlined at a recent Transportation Company Workshop that it is now expanding its truckload business west to Alberta and British Columbia.

Clearly carriers on both sides of the border are realigning their strategies to match their capacity to where they perceive the demand to be. As capacity continues to exit the market, it is critical for truckload carriers to apply these precious assets to the geographic areas and lengths of haul that represent the best opportunities for profits.

A little over a year ago I wrote a blog on LinkedIn, the very popular social networking site for professionals. At that time, I characterized LinkedIn as a “work in progress.” The site had some interesting elements but it was still underdeveloped. Over the past year, a huge number of people have signed on to LinkedIn. I thought it was time to take a look at how much progress has been made.

Perhaps the first thing to understand about LinkedIn is that one must have realistic expectations about what it is and is not designed to do. LinkedIn does not replace networking; it facilitates it. Networking is all about forming personal bonds and relationships. This is best done face to face. Nevertheless, LinkedIn can support the networking process.

To derive some benefit from LinkedIn takes work. One must keep one's profile up to date and continue to build one's network. One must share information with one’s “Connections.”

For LinkedIn to be of value to logistics and transportation professionals, the first thing you must do is invite your key contacts to join your network (on LinkedIn). This is a relatively simple process, particularly for users of Outlook. Essentially you point and click, push the “invitation” button and wait for responses. Once your key contacts are part of your network, you can use the features to share or obtain information from them.

The process of adding “Connections” should take some careful thought. Every few weeks I receive “Invitations” from people I don’t know. Frankly I cannot see the value in making blind requests to folks whom you have never met. The value of LinkedIn is the ability to create a network, or network of networks, of people in different sectors who can help you and whom you can help. By selecting people you know, this provides you with history, a level of trust, and a frame of reference upon which to build and share.

“Networking” on LinkedIn goes beyond having visibility into the “Connections” of your network. It involves sharing information with your contacts. This can mean forwarding articles and reports that may be of interest, highlighting a book you have just read or identifying conferences or webinars that may be relevant to certain groups. In other words, this tells your network that you value them and they are important to you.

Another feature of LinkedIn is the ability to join groups that match your skills and interests. There are numerous logistics related networking groups on LinkedIn. These include industry associations such as the Council of Supply Chain Management Professionals, country specific associations such as the Canadian Transportation & Logistics Networking Group and industry verticals such as the Food and Beverage Supply Chain Professionals. There are also groups for industry sub-sectors such as Trucking Consultants. Participation in each group provides you with access to the knowledge and expertise of its members. If you cannot find a network that is the right fit for you, LinkedIn allows you to create your own group and set the membership guidelines.

Access to these groups allows you to perform a number of very useful functions. You can post job openings and projects and seek out qualified candidates. You can also advertise that you are looking for work. LinkedIn allows you to ask questions of the group. I recently used this feature and found it be very powerful. By asking a focused question to three of my “groups,” I was able to receive a wealth of valuable, insightful information. This information came from knowledgeable people all over the world that would have been difficult to obtain from other sources.

There are other networking tools that are available to the LinkedIn user that enhance its networking capabilities. The little used Status feature allows you to identify what you are working on or outline where you will be (e.g. Going to PMAC Conference in Quebec City – please let me know if you are going so we can arrange to meet). The “Events” section allows you to share with your network and others, the major industry related events that you may be attending or at which you may be delivering a paper. The “Recommendation” feature can be used to provide recommendations on the work of your colleagues and vendors and to solicit recommendations on the work that you have performed.

LinkedIn is still a “work in progress,” but a lot of progress has been made. Since so many people have signed on, it is much more valuable than it was a year ago. It is becoming an increasingly powerful networking tool for business professionals; in particular professionals in logistics and transportation who are prepared to devote the time and effort needed to successfully use this resource.

There are a number of initiatives underway to improve Canada’s competitive position and facilitate cross-border business growth. At the recent SCL Annual Meeting, several presenters focused on Canada’s various gateway strategies.

Asia-Pacific Gateway and Corridor Strategy (APGCI)

British Columbia is the focal point of the Asia-Pacific Gateway Strategy. The Province’s major ports, airports, railways, and roadways are a major hub in a supply chain providing many of the goods we consume each day. A consortium of Port Authorities, Industry Associations and Governments at the Federal, Provincial and Regional level oversee the execution of the Strategy.

British Columbia’s ports are the shortest marine links to the economies of the Asia-Pacific. The provinces’ established road, rail and air connections reach deep into the heart of Canadian and US markets. Container traffic to all west coast ports is forecast to rise a staggering 300% by 2020. The Province is looking to the future and planning for that growth.

The Province is building on British Columbia’s natural advantages through the Pacific Gateway Strategy, setting ambitious volume targets for 2020:

- 9 million TEUs in container traffic imports from Asia-Pacific producers (up from 2 million in 2005)
- 95 million tonnes: bulk & break-bulk exports such as forestry products, agricultural products, petroleum products and metals (up from 70 million in 2005)
- 28.4 million air passengers through YVR (up from 16.4 million in 2005)
- 441,000 tonnes of air cargo (up from 223,700 tonnes in 2005)

New and upgraded road, rail, port and airport infrastructure are expected to provide importers with a reliable link in the North American supply chain and exporters with greater access to foreign markets.

Atlantic Gateway Strategy

In October 2007, Ministers Cannon and MacKay signed the Atlantic Gateway Memorandum of Understanding (MOU) with the four Atlantic provincial governments. The MOU names the Atlantic Gateway Federal/Provincial Officials Committee as the key forum for developing the Atlantic Gateway. The Committee is made up of 10 members (Four Atlantic Provinces, Atlantic Canada Opportunities Agency (ACOA) and Transport Canada).

The mandate is to develop an Atlantic Gateway strategy that will benefit the Atlantic region and Canada; and guide the long term planning work and analysis in support of future gateway initiatives. The Committee is charged with identifying key elements of the multi-modal transportation system, which support gateway development; engaging stakeholders to understand private sector needs; identifying the first projects to be delivered; and developing and implementing a work plan.

Ontario-Quebec Continental Gateway and Trade Strategy

In central Canada, the Ontario-Québec Continental Gateway and Trade Corridor Strategy is being undertaken. The central location of Ontario and Quebec’s and the fully integrated transportation system of these two provinces provide a competitive advantage for Canada-U.S. and international trade. Ontario-Québec has easy access to 135 million consumers within 1000 Km – a less than one day truck trip. A trans-continental rail system provides access to major markets in North America. The St. Lawrence Seaway provides access from the Great Lakes to trans-Atlantic shipping. Canada’s busiest airports for freight and passengers are in Ontario and Quebec. They are a key component in just-in-time courier deliveries among other things.

NASCO (North America’s Super Corridor Coalition)

While no representatives from NASCO delivered a presentation at SCL, they did have a booth at the conference. To help address the capacity constraints at the major U.S. ports of Los Angeles and Long Beach, California, a non-profit tri-national (Canada, USA and Mexico) organization was formed in 1994. This public-private consortium was established to create a 2,500-mile-long multimodal transportation network linking the three countries, 71 million people and supporting $1 trillion in total business between these countries. The “Super Corridor” stretches from the ports of Mexico (i.e. Lazaro Cardenas, Mazatlan, Manzanillo) to the border crossing of Laredo, Texas, through 11 states, on to Eastern and Western Canada through Detroit’s Ambassador Bridge. This year’s annual NASCO Conference is being held in Quebec City in early June.

To develop the inland network, NASCO formed NAIPN (North America’s Inland Port Network) that includes Alliance (Fort Worth), Texas, Dallas Logistics Hub, KC Logistics Hub, Port San Antonio, Des Moines, Iowa, Winnipeg, Manitoba, Puerto Interior Guanajuatco, Bajio Central Mexico, Interpuerto Monterrey, Proyecto Distrito Multimodal Villa XXI and Durango, Mexico. The main guiding principle of the NAIPN is to develop logistics systems that enhance global security while maintaining the cost effective and efficient flow of goods.

Other Gateway Strategies

In addition to these four well known initiatives, there are a host of other port cities as well as inland ports that have their own gateway strategies. An inland port has been defined by the Center for Transportation Research at the University of Texas as “a physical site located away from traditional land, air and coastal borders with the vision to facilitate and process international trade through strategic investment in multi-modal transportation assets and by promoting value-added services as goods move through the supply chain".

At the SCL Conference one inland port that was highlighted was Edmonton, Alberta. With its access to road, rail and air transportation and its strategic location with respect to Canada’s oil sands, mineral deposits and gas resources, Edmonton could be a major component of Canada’s transportation strategy. To position itself for growth, a multi-modal logistics park is being planned. Other cities in Canada have their own strategies.

Market Driven or Government Driven

It is noteworthy that each of these initiatives appears to be driven by government with industry assistance, but not by shippers. In fact, at one of the SCL lunches, I sat with an individual from one of the Canadian government agencies charged with marketing some of these capabilities. Also, there does not appear that much coordination among the various gateway programs. There was no mention of NASCO by any of the three major Canadian Gateway presenters, all government officials.

While each of these strategies is commendable, the question is whether shippers care about the gateway through which their goods move, in particular U.S. based shippers. For most shippers the issues are transit days, cost and reliability. If a shipper’s freight can reach its destination faster and at a lower cost through the Port of New York, Savannah, Tacoma or Long Beach, that is what is of most concern. If any or all of these gateway/corridor strategies can result in a superior value proposition for shippers, they will succeed. If not, they will be superseded by alternatives that provide more consistent and cost effective transportation. Hopefully these government/industry association partnerships will provide Canada with a superior transportation infrastructure and competitive advantage.

In the last blog, the focus was on Canada’s “Gateway Strategy” initiatives, a series of government/industry association projects designed to smooth the flow of goods through Western Canada, Central Canada and Atlantic Canada. The intent of these projects is to increase Canada’s competitive position. It is important to understand that much of Canada’s freight flows through the industrial heartland of America and in particular through Chicago, Illinois. Other than Chicago, there is no single common geographical point in Canada or the United States where all major railroads intersect or meet.

Chicago is the most important rail hub in the United States and one of the freight transportation industry’s biggest bottlenecks. One third of all U.S. freight goes to or through Chicago. A large percentage of Canada’s cross-border freight goes through this hub as well. Six Class 1 railroads send nearly 500 freight trains hauling 37,500 railcars through Chicago every day where they compete for space with more than 800 passenger trains and road traffic. These trains all have switching, intermodal, and/or refuelling sites in this area. Trains originating in Canada may take two to four days to arrive from Canadian locations and can take two days to move across the city of Chicago.

Chicago, known as the world's Rail Capital, has become the world's largest rail bottleneck and the epitome of congestion. At many of the Chicago locations there are no rail-to-rail connections. The passing of rail bulk freight cars and rail freight is normally routed on rail, albeit slowly, to avoid transloading. However, the transfer of intermodal containers (COFC) and piggyback (TOFC) between railroads is not seamless. Many trailers and containers move via truck, across town, to connect among the railroads.

Since Chicago is an interchange point for the major U.S. and Canadian rail lines, most trains headed for the city must stop at terminals or processing yards to be broken apart so that blocks of railcars can relayed to multiple locations throughout North America. In an ideal world, the rails would send their trains direct and intact, to destination. Except for bulk commodities, that is not a viable approach. To run a profitable railroad, it is necessary to create some critical mass, a unit train. To make service, the trains must have enough volume and move in a timely manner to be competitive with truck service.

Total rail volumes in the U.S. are projected to increase by 69 percent by 2035 (American Association of State Highway and Transportation Officials AASHTO 2007b) and total freight volumes, transported via all modes, are expected to increase by 70 percent (U.S. Department of Transportation 2002). Unless change occurs there will continue to be rail congestion in Chicago. As a result, daily rail traffic is significantly delayed. These consistent delays and inherent congestion negatively impact the U.S. and Canadian economies and national security, public safety, freight security, and the environment.

To address these issues, at least two approaches are being undertaken. One approach is designed to maximize throughput through Chicago; the other approach is designed to bypass it.

Chicago Region Environmental and Transportation Efficiency project (CREATE)

Just as Canada’s Gateway Strategy initiatives encompass a variety of infrastructure and transportation related projects, CREATE is an ambitious network of 78 infrastructure projects, including 25 rail-highway grade separations, six new “flyovers” and a series of other signalling and track improvements. While CREATE was proposed a decade ago, the need to stimulate the U.S. economy, to create jobs and to improve the current freight transportation infrastructure are creating the impetus to move this project forward.

The new Obama administration has strong links to Chicago. Transportation Infrastructure funds are part of the economic stimulus program. However, CREATE’s completion is likely somewhere between 2015 and 2020. The scope of the projects and the time needed to obtain funding approval will extend the completion date of this work by a decade or more.

Bypass Chicago Strategy

This timeline is what encouraged CN to take a different route. The company has closed a transaction to purchase the Elgin, Joliet & Eastern Railway which loops around Chicago, to provide an improved connection between CN’s east-west and north-south route trains. This will allow CN’s trains to bypass Chicago, where they now face extensive delays.

Hunter Harrison, CEO of CN warned that the amount of freight moving by rail will continue to grow, and that an ongoing effort by the rail industry and government to reduce problems in the Chicago area, were moving too slowly. CN will now begin a measured, step-by-step integration of the newly acquired EJ&E lines to ensure a safe, efficient combination of the two rail operations. EJ&E operates over 198 main line miles of track encircling the City of Chicago from Waukegan, Ill., on the north, to Joliet, Ill., on the west, to Gary, Ind., on the southeast, and then to South Chicago.

Not to be outdone, CP Rail is looking at partnering with the Kansas City Southern Railroad in Kansas City. The two railways share a railyard at Kansas City, Mo., where KCS is based. With CP's absorption of the regional Dakota, Minnesota & Eastern in the Great Plains, this created some opportunities for synergies between the two railroads.

While these scenarios may benefit some CN and CP customers, they do not and probably will not fully address the prospects of increased congestion in Chicago in the years ahead. There is probably a need for all of the major railroads to look at alternate sites (e.g. Kansas City, St. Louis or certain points in Ohio) as a means of taking the pressure off Chicago. A well engineered and efficient freight rail system would reduce congestion, improve transit times, improve safety, maximize security, and minimize the effects on the environment. Hopefully this will be given consideration as part of the Stimulus measures that are being planned. Since a significant part of Canada’s NAFTA freight flows through this corridor, all Canadians involved in the freight industry will be watching the progress of addressing Chicago’s congestion problems with a keen interest.

Back in 2001, Jim Collins wrote one of the most popular business books of all time, Good to Great - - why some companies make the leap and others don’t. Mr. Collins has written a new book that is sure to be another top seller entitled “How The Mighty Fall and Why Some Companies Never Give In.”

Since this is such a difficult time for so many trucking companies, and companies in other industries, I thought it would be interesting to look at some of themes that are highlighted in the book and relate them to examples that I have witnessed in the trucking industry. In the book, Mr. Collins outlines the “Five Stages of Decline.” One of the important messages is that a company “can be well into Stage 3 decline and still look and feel great, yet be on the cusp of a huge fall. Decline can sneak up on you and - - seemingly all of a sudden - - you can be in big trouble.”

However, “with a road map to decline in hand . . . (trucking companies) . . . heading . . . downhill might be able to apply the brakes early and reverse course.” Some companies in his study came “back even stronger - - after having crashed into the depths of Stage 4”. . . . Mr. Collins’ research indicates “that organizational decline is largely self-inflicted, and recovery largely within our own control. So long as you never fall all the way to Stage 5, you can rebuild.”

Very briefly here are the 5 Stages of Decline.

Stage 1: Hubris Born of Success

In stage 1, Mr. Collins asserts that some companies become arrogant and lose sight of the underlying factors that created success in the first place. Since luck and timing can often play a role in success, some companies tend to overestimate their own merit and capabilities and succumb to hubris. He expresses the view that strong leaders maintain their fear of failure and their discipline, even as their companies achieve success.

Stage 2: Undisciplined Pursuit of More

Hubris leads to an undisciplined pursuit of more - - more scale, more growth, more of whatever those in powers see as “success.” This has been quite evident in the trucking industry. There have been numerous examples of LTL service expansion in areas where the carrier had limited freight density. Both LTL and truckload carriers have been guilty of growth through aggressive pricing while drifting away from the pricing discipline that was a key to profits and growth through expansion into services and markets (e.g. flatbed, reefer) for which the company has no core competence.

Overreaching, making discontinuous leaps into areas that are inconsistent with core values is undisciplined. Addiction to scale is undisciplined. Leaping into new areas without one’s core competence is neglected in undisciplined.

Stage 3: Denial of Risk and Failure

In Stage 3, leaders begin receiving warning signs but discount them as “temporary,” “cyclic,” or “not that bad.” They discount the negative news while blaming external sources for their setbacks. “When those in power begin to imperil the enterprise by taking outsize risks and acting in a way that denies the consequences of those risks, they are headed straight for Stage 4.”

Stage 4: Grasping for Salvation

The consequences of drifting from Stages 1 through 3 are a sharp decline that is visible to all. Declining margins, customer erosion, employee defections can all be signs of a company in turmoil. Leaders who find themselves in these situations have two fundamental choices. They can lurch for a quick salvation or they can go back to the disciplined approach that brought about greatness in the first place. By grasping about in fearful, frantic reaction, late Stage 4 companies accelerate their own demise.

Stage 5: Capitulation to Irrelevance or Death

In Stage 5, the accumulated setbacks and misguided false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. Mr. Collins argues that good leaders keep the faith and focus on a cause larger than survival and larger than themselves. They maintain the determination and discipline to take those actions, no matter how “excruciating”, to preserve the viability of the enterprise.

It is all about Leadership

The book looks at leadership and team behaviour on the way down and on the way up. In essence the message to business leaders is to remain humble, disciplined and fact-based. Leaders should challenge their team members to come forward with ideas and to engage in a constructive debate on the key drivers of the company. Every member of the team should accept some responsibility for poor results rather than engage in extensive finger-pointing. Clearly there are some valuable lessons in this very timely book that can help business leaders keep their companies on top and prevent them descending into a downward spiral.