As the North American economy begins to improve, companies are starting to hire, albeit somewhat tentatively. With the true unemployment/underemployment rate estimated to be somewhere in the range of 15 to 20%, this suggests that there is a lot of good talent walking the streets at this time.

The dilemma for executives across North America is trying to increase the odds of making a good hire. Anyone who has been in business for any length of time and who has hired staff at any level knows how difficult it is to recruit good talent, particularly good leaders. Even companies such as General Electric that have worked diligently over many years to train leaders in-house have made mistakes.

There are unique challenges in recruiting strong leaders from outside the company. The successful candidate must have an excellent portfolio of management and decision-making skills, strong communication and interpersonal skills and must be able to adapt to the culture of the company. An in depth knowledge of the industry and the business is often desirable if not essential. This is a tall order and a great deal of time, money and energy can be wasted on ineffective leaders. According to Heidrick & Struggles International CEO L. Kevin Kelly, 40% of executives hired from the outside last only 18 months.

With the supply of available human resources being so large and with the need to make good hires so great, some companies are employing a new hiring strategy, trying before buying. These companies are utilizing the standard hiring processes including multiple interviews, psychological testing and extensive reference checks. But those approaches are not infallible. As a result, some companies are auditioning their new hires for weeks or even months. In Europe and Asia, “interim executives” have long been popular. Now this practice is being adopted by North American companies.

This approach has a number of benefits. Companies can mitigate their risks by not signing a contract and by not committing to fixed costs or severance payments. They can see the prospect perform before making a commitment. Another benefit is that a company seeking an outside leader can fill a vacancy in a matter of weeks as compared to the interval normally required for an extensive job search. There are a number of companies that are competing in this niche business that have compiled rosters of prospects.

This approach also has benefits to the job hunter. As an auditioning executive, the individual can make an informed assessment of whether or not the company is a good fit for them and obtain a better sense of the political environment and culture. He or she can continue to search the job market for permanent work. The job seeker can earn an income while maintaining the search. The auditioning leader also doesn’t have to change location or one’s LinkedIn status until a permanent commitment is made.

To make this work, a company must have a very good hiring process and make a significant commitment to the “trial executive.” The new person will almost certainly interact with other employees and leaders. He or she may also have some interaction with customers. This is not an approach where you can try Joe for a month, Harry for two months and Bill for six weeks. This would be very disruptive to the company’s operations and look badly on those performing the hiring. It would be hard to imagine a trucking company CEO hiring a “test market” VP of Sales, exposing that individual to the company’s sales team and customers on a test basis and then waving good bye. On the other hand, this approach could be employed for a new sales hire to see if they have what it takes to bring some revenue on board.

There are also other approaches that work well in some situations. A consultant can perform certain activities and then leave the company at the end of the project. Similarly, a project leader can be brought on board to complete a specific task (e.g. develop a business plan to open a new market) for a designated period of time and then leave at the completion of the assignment.

The “try before buy” approach is a new niche hiring approach that is right for the times. It remains to be seen if this hiring technique will retain its appeal as the economic recovery gathers momentum.

The good news is that we appear to be in an economic recovery; the bad news is that business growth is so modest that it is almost imperceptible. The challenges this year for truckers are twofold: replace revenues lost in 2009 and improve the yield or margin on their freight.

In 2009 shippers had the upper hand. With declining volumes, shippers took advantage of the situation to issue and reissue RFP’s. Rate decreases were easy to achieve. Year / year revenues at North American trucking companies declined by 6, 16, 22, 28, 30 or as high as 48 percent. Carriers responded by shuttering terminals, cutting staff, freezing pay, all in an effort to maintain margins on the reduced revenue. This helped to offset some of the damage but many companies saw their profits take a precipitous drop in 2009.

What should truckers be doing in 2010? Should carriers play a “wait and see” game in anticipation of an economic recovery or are there some strategies that should be initiated immediately to improve their fortunes? How can carriers break out of this paradigm of reducing costs in line with declining volumes and margins? There are several options that carriers need to pursue and they should all be implemented in parallel.

1. Increase Business from Existing Profitable Accounts

Many trucking companies have longstanding profitable accounts that have shown some level of loyalty. Yes, the rates on some of these accounts may have gone down in 2009 due to competitive pressure. But the chances are these customers have freight on lanes that you do not move today. They are the most likely customers to give you additional profitable business. Targeting these accounts makes much more productive use of your salespeople’s time than focusing on new prospects that play your rates off against those of the incumbents.

Go back and take a second or third look at whether or not your company can handle these new lanes. What are the barriers to securing this business (e.g. no/limited back haul, don’t want to go to these markets etc.). This is probably your best opportunity to secure new, profitable business. Rethink what your company needs to do to make this happen.

Can you move the freight through a brokerage operation? How difficult is it to establish such an operation? Could you work with a partner or competitor to use their headhaul freight as your backhaul? Could you migrate some of this brokerage business to your asset based business over time, when you have enough head haul and back haul freight to make money?

2. Change the Rules of the Game

There are too many companies playing the rate reduction game. If all your sales and pricing people are doing is shuttling back and forth to shippers’ offices with ever declining rates, you are playing a losing game. Change the game by finding out more about your customers’ supply chains. Look at what your company, possibly in conjunction with partners can do to improve the efficiency of their operations. This, in essence, is what logistics companies are doing.

They receive a mandate from a senior executive at a shipper to do a “deep dive” into their processes and procedures. They change logistics processes that allow them to perform the same tasks more efficiently, with fewer people and better systems. They lower the baseline cost, add a mark-up for themselves and then price the business so that the overall cost is less than it is today.

This is the game that more carriers have to learn how to play. While this cannot be done overnight, you have to start somewhere. This can as basic as teaching your employees how to look for and capitalize on these opportunities, hiring staff with this type of background, and/or specializing in a certain market segment where your company can be a leader. This can serve as a stepping stone to future logistics and trucking business.

3. Save Your Customers Money without Hurting Your Bottom Line

This may sound impossible but it isn’t. During my consulting work with shippers over the past six years, I am amazed at how many cost savings opportunities present themselves, even at companies with very experienced logistics personnel. These opportunities surface in a variety of forms.

Some shippers are using the wrong mode of transport (e.g. LTL versus consolidated milk runs versus over the road truckload versus intermodal). They may be shipping in inefficient ways. This can include poor order management procedures, poor scheduling processes, ineffective collaboration between Sales, Production and Logistics or inadequate dock management processes. Another lost cost savings opportunity for many shippers is poor packaging and loading. You only have to look at Wal-Mart’s success to see what can be achieved by reducing packaging costs.

Have your customers looked at their pallet dimensions? When you double stack the pallets, how much air is there at the top of the trailer or container? Is this space causing unnecessary damages? Can the pallets be reconfigured to improve cube utilization?

If you collaborate with your clients and help them take costs out of their transportation budget, this may help your company load better cubed trailers and allow both of you to make more money.

The Road Ahead

Demand will eventually increase in line with the current capacity. This will serve to elevate margins. You can play the “wait and see” game. Alternatively, your company can take a proactive approach by adopting a more expansive business development strategy, by becoming more supply chain versus trucking company focused and by becoming part of the solution rather than the problem by helping your customers remove costs from their transportation expenditures. The choice is yours.

As we all watch the images on television of the devastation in the Port-au-Prince area of Haiti, the other issues in the world seem so trivial by comparison. This impoverished country is dealing with one of the largest natural catastrophes in history. As many as 45,000 people may be dead. Countless others are injured, starving, thirsty and without shelter, money or clothing.

It is gratifying to see the relief efforts that are being offered by many countries and the huge outpouring of financial aid from around the world. Multiple operations are underway, including flights carrying aid on behalf of the International Committee of the Red Cross.

French and German search and rescue teams flew to Haiti Thursday to assist the aid effort there. The teams departed Paris Charles De Gaulle airport Thursday afternoon on a 767-300 aircraft chartered by Chapman Freeborn’s Paris office. Also on board were vital cargo supplies including medicines, purification units and power equipment. Chapman Freeborn Airchartering said it was working around the clock to arrange charters carrying aid supplies from Spain, Germany, the UK and Belgium. Other countries (e.g. Canada, Israel, and Australia) are also bringing support to the country.

However, a demolished seaport, a congested one-runway airport, a shattered communications system, and even questions about how to coordinate the multi-national relief effort delayed the delivery of aid to an increasingly desperate Haiti and highlighted the immense obstacles that lie ahead.

The Toussaint L'Ouverture International Airport in Port-au-Prince is largely undamaged, according to a report from Chapman Freeborn Airchartering, but lacks air traffic control and is overwhelmed. The U.S. Federal Aviation Administration had put a ground stop into place for all U.S.-originating civilian aircraft until 6 p.m. EST on Friday, January 15. Military flights carrying water purifying equipment, medicine and generators have been given priority to land.

A high likelihood exists of extensive airborne holding and diversions due to an overloaded airport. There are currently no slot restrictions, but this is extremely likely to change in the next few days given demand. Limited ramp space and very limited handling capacity is available. An instrument landing system is now operating. Fire cover is now in place. No fuel is available at Port-au-Prince. Carriers must fuel up prior to departing point of origin and so payloads are smaller.

Making matters worse is that supplies cannot come in by sea. Haiti's main seaport has "collapsed and is not operational," says Maersk Line's Mary Ann Kotlarich. The main dock is partially submerged. Cranes that moved containers on and off ships at the port are now partially under water and listing badly. Ships carrying supplies have nowhere to dock. Numerous maritime companies are trying to devise stop-gap solutions, but nothing is in place yet. This is leading to desperation and the threat of violence.

Clearly there is great need for a coordinated logistics and security effort. The situation in Port-au-Prince is very precarious, said Andy James, a spokesman for Chapman Freeborn. “Santo Domingo currently provides a viable alternative to Port-au-Prince,” he said. Santo Domingo is the capital and largest city in the Dominican Republic, which shares the island with Haiti. It is several hours’ drive along difficult roads from the earthquake zone. Santo Domingo airport in the neighboring country of the Dominican Republic provides a viable alternative to Port Au Prince airport.

Aid workers also are calling for more security to get goods distributed in an increasingly chaotic and dangerous environment. An aid coordinator told Agence-France Presse some trucks on the road into Port-au-Prince were targets of hijacking attempts on Thursday.

Clearly there is a requirement to establish a centralized command and control process to bring order out of chaos. The short term priorities are to:

• Develop a comprehensive plan to deal with key challenges this country is facing.
• Provide food, water, security and shelter to those people that have been displaced from their homes.
• Re-establish a communications network in the country.
• Treat the injured and rescue those people who are trapped. Time is running out for people who are trapped and have been without food and water for four days in 35 degree temperatures.
• Remove the decomposing corpses that may lead to the spread of disease.
• Organize a massive clean-up effort
• Develop a plan to channel the donations from around the world to Haiti’s most pressing needs.

President Obama has pledged that the United States will not forsake Haiti. That is a bold statement and it will be a tremendous challenge to follow through on this pledge. Haiti is the poorest country in Western Hemisphere. The per capita income is $660. One percent of the population control 50% of the country’s wealth. Haiti has no oil, gas or coal and demolished much of its forests in its search for energy. Two-thirds of the population are listed as employed in agriculture and only nine percent in industry. The country is plagued by incest and domestic violence, epidemic levels of HIV-AIDS and a host of other problems.

The question is what will happen as the relief effort takes effect and the focus inevitably turns to trying to create a viable economy and life for the citizens of Haiti. Will the other nations of the world maintain their resolve to help Haiti or will they shift their attention to the next area to be hit by a disaster. With Haiti’s shaky political system, will the millions of dollars in donations help rebuild the country’s infrastructure, education, health care system and economy or line the pockets of the political elites? Let’s hope the nations of the world will take this unique opportunity to move this country in a sustainable and positive direction.

Jon Langenfeld, Associate Director of Research, at Robert W. Baird & Company delivered a very comprehensive and insightful presentation on the state of the American domestic freight transportation industry at this week’s SMC3 conference in Atlanta. While Jon was one of the more upbeat speakers at the conference, his 2010 outlook on the LTL segment of the industry was somewhat less positive.

Jon highlighted the double digit declines in tonnage and revenue per hundredweight among the major publically traded LTL carriers in 2009. He also noted that despite some terminal closures, LTL capacity has been largely unchanged. The most troubling comment was that the profitability of the entire industry is now in negative territory and is not sustainable.

This situation is not expected to change that quickly since LTL demand typically lags truckload demand. Truckload demand is showing only tentative signs of a turnaround. Excess capacity, weak demand, aggressive pricing, low fuel surcharge revenues, lender leniency in allowing financially weak carriers to remain in existence and the increased presence of freight brokers and 3PL’s as resellers of LTL service are all conspiring to make a bleak situation remain difficult, at least until mid year or longer.

This begs the question, what can carriers in this sector do to increase revenues and yields at such a challenging time? Many of the tried and true approaches were implemented in 2009. Carriers have attempted to speed up their networks by reducing handling costs and offering more direct service lanes. They have cut staff and reduced wages. They have reduced rates in an effort to increase volumes. With too many LTL carriers chasing too little LTL freight, these approaches are having limited success.

One approach that was mentioned in Atlanta and has been raised in other forums is the option of forming carrier alliances, specifically another North American LTL network similar to the Reliance Network. There are still a number of regional LTL carriers in Canada and the United States that are not able to offer full coverage of North America. Some have alliances with specific carriers in certain lanes but that is it. Forming alliances with a broader group of carriers allows the various team members to increase the volume of freight picked up from and delivered to new and existing shippers and as a by-product, improve yields.

There are essentially two types of alliances, operational alliances and marketing alliances. In an operational alliance, the participants serve as pick-up and delivery agents for each others’ companies but do not actively sell each others’ services. In a marketing alliance, the players go one step further by actively selling the full range of services of all of the member companies. While the former approach can generate some additional business, the latter, when done properly, can produce much bigger results.

Keys to Success

To make a marketing alliance work, the following elements must come into play.

1. Integrity
You have to be able to trust your partners and be able to communicate your plans for the future. This includes expansion plans so there are no surprises and ill will down the road.

2. Commitment
All participants have to commit to the ongoing sales and marketing of the alliance’s service capabilities.

3. Seamless Service
The service between carriers must appear seamless to the customer and the transit times should be as good as or better than what is available in the market today.

4. Through Tracing
All partners should be able to direct customers to their respective websites. Customers should be able to trace all shipments given to their partners in the same manner as their own regional shipments.

5. Through Pricing
There should be tariffs in place that offer pricing that is comparable to what a shipper would pay with a national or super-regional carrier.

6. Joint Marketing
There is a need for sales collateral that highlights the services of the full consortium of companies.

7. Sales Training
The sales people of all of the partners need to be trained on the services, transit times, value added and pricing levels for all of the inter-regional players.

8. KPI Development and Sales Management
KPI’s need to be created and monitored for this initiative. They must have the ongoing support and visibility of the senior sales and management teams to maintain the momentum of the alliance.

The Pitfalls

There are some potential problem areas with this approach. We don’t live in a static world. As a result, the coverage areas of the various alliance partners may change over time. To make these programs work, there must be a level of openness, trust and information sharing. This is not easy for everyone. It is also not always easy to maintain enthusiasm for the program over time, as carriers deal with other priorities and initiatives that arise. There is the issue of exposing your customer list to companies that could ultimately become your competitors.

Also, how do you deal with non-performing members and with potential new members who would like to join the club, particularly when you already have an incumbent in place that serves the same geographical markets? There are no easy answers to these questions. They can all be addressed but it takes hard work and good communication to come up with solutions that are acceptable to all of the partners.

However, the rewards can justify the effort. The national LTL market is in flux. The current industry paradigm is not sustainable. There is a lack of LTL freight in the market. Regional joint marketing programs or the formation of a new North American LTL network allows all of the participants to generate new revenues and increase yields without adding terminals and sales personnel.

Should any of you need help in forming and successfully implementing an alliance with other LTL carriers, please feel free to contact me at (416) 932-9701 or e mail me at dan@dantranscon.com.

Over the past few years, shippers and carriers have begun to acknowledge the importance of having well defined sustainability programs. While the move to green strategies started several years ago, the fuel price increases in 2008 were the impetus for many companies to take their programs to the next level. Shippers now look at their carrier sustainability programs not just as desirable or environmentally friendly, but as a requirement to secure their freight business.

Working with shippers over the past few years on carrier procurement and freight rate negotiation initiatives, my company has observed more of our clients challenging their potential vendors to articulate their green strategies. Specifically, carriers are being asked not just about transit times and dropped trailers but about their miles per gallon per truck and whether they are a Smartway carrier. An ever increasing number of shippers are recognizing that carrier sustainability strategies are cost reduction strategies. Carriers that limit their speeds and monitor their idling times are more efficient than carriers that are less focused in this area. Ultimately, the more fuel efficient carriers are lower cost carriers. This should translate into lower rates and more efficient supply chains.

As shippers evaluate prospective carriers as potential business partners, there are a number of specific items they should address as part of their RFP activities.

• Carrier Sustainability Metrics

Energy efficiency is quantifiable. Carriers measure miles per gallon, out of route miles, driver speeds, and empty miles. When a shipper meets with a prospective carrier, it is fair to ask the potential vendor to provide an overview of their energy management metrics. Carriers that stumble on these questions or don’t know the answers are providing you with a warning signal. They are telling you that they are not well managed and/or their sales people are poorly informed. This is a red flag.

• Participation in major Sustainability Programs such as Smartway

Smartway is a voluntary program designed to increase energy efficiency while reducing greenhouse gases and air pollution. The designation means something. It tells you that the participating carriers are seeking to improve aerodynamics, freight logistics, engine idling and driver training regarding fuel economy. Shippers should be asking themselves, do they wish to partner with companies that are not pursuing these objectives when their competitors are fully engaged in this area? For participating carriers, ask them for their “Smartway Shipper Index Factor” and if they are or have been a Smartway Excellence Award winner. This will provide you with an evaluation of how well they are performing.

• Driver Training

This is the essence of any sustainable program. Training establishes discipline and consistency. Well trained drivers maintain their vehicles properly, monitor their speeds at designated levels and manage their idling time. They are the key resource in any carrier sustainable program.

• Sales Training

Carriers that have well planned sustainable initiatives should be telling their clients about them. Rather than having to pull this information out of them, they should be proud to tell their clients and use this as a marketing tool to gain competitive advantage. This is good public relations and good business.

• Carrier Initiated Green Cost Savings Suggestions

Those carriers that do business with your firm observe your freight management practices. They experience waiting times. They see poorly configured pallets. They pick up daily LTL shipments (that could be consolidated into partial or full loads). In other words, they see first-hand, the opportunities to be more energy efficient. You should expect your top carriers to offer suggestions on how, working together, both companies can be more energy efficient and reduce costs.

Energy efficiency will become far more important in the years ahead. As the world’s supplies of fossil fuels are depleted, governments will be wrestling with Cap and Trade legislation (and other programs) to reward energy efficiency and punish wasteful and inefficient energy practices. This is certainly the time for shippers and carriers across North America to formalize their short and long term energy efficiency initiatives.