At a recent Driving for Profit seminar, hosted by NAL Insurance and KRTS Transportation Specialists, business networking guru Allison Graham shared some insight on how to network effectively at business functions. This is Part 2 of this blog series. Part 1 looked at common networking mistakes. This segment will examine Allison’s “Top Tips.”

By way of introduction, Allison Graham is president of Elevate Seminars and Strategic Development, and author of the book Business Cards to Business Relationships; Building the Ultimate Network. To find out more about Allison or to order her book, visit www.elevatebiz.ca.

TOP TIP #1 - BE STRATEGIC: Rather than attending random events hoping to stumble across a good contact, Allison suggested putting some thought into which events will attract the types of contacts you want to meet.

“Ask the questions: Where should I go? Who shall I meet? Be strategic, put yourself in the position to win,” she advised.

TOP TIP #2 – CLOSE THE LOOP AND FOLLOW THROUGH: Too often, according to Allison, people leave a networking event with the best intentions of following up with a new contact – however they put it on the back burner and fail to reconnect.

“I guarantee each of you will have a reason to follow up with at least one other person you met today, for some reason,” she told the Driving for Profit audience. “The majority of you will get back to the office, get back into the normal grind and will not follow through with the commitment you made.”

When you’ve made a connection with someone through another contact, go back to them to thank them or provide an update, Allison urged. Also, if you say you’re going to do something with someone – whether it be lunch or a round of golf – make sure you follow through with that as well, she stressed.

“Unless you intend to spend five or six hours with that individual, do not talk about playing golf because each of those (failures to follow up) chips away at your credibility,” she warned.

TOP TIP #3 – KNOW THE MINGLING FORMULA: At an industry function, your goal should be to meet as many people as possible, said Allison, so you need to be efficient when it comes to working a room.

Spend a maximum of 10 minutes with each person you meet at a cocktail-type networking function, Allison advised. When approaching a new contact, Allison suggests: Initiating a conversation, getting their contact information and then moving on. It shouldn’t take more than 3-8 minutes per person, she added.

Many people struggle with how to gracefully end a conversation. She said there are three ways to accomplish this: the verbal disengage; the third-party introduction; and the ‘gotta go’ technique.

The verbal disengage involves simply ending the conversation. The magic word for a closing line is ‘well,’ according to Allison. ‘Well, it’s been good chatting with you…” “Well, we’ll have to talk about this again…” ‘Well’ accompanied by a statement is a good closing line, she explained.

The third-party introduction is what Allison termed the “natural mingling dance” that happens at networking events. When you’re speaking to somebody and someone you know comes along, introduce the two of them and then step aside. Allison says this technique only works if you’re in the middle of the action, with many people milling about. “Nobody’s going to come save you if you’re standing in a corner,” she pointed out.

The ‘gotta go’ technique simply involves tell the person you’re speaking with that you have to go to the washroom. But Allison warned to be sure you follow through and actually visit the restroom. “You can only say you gotta go if you really gotta go, because there’s nothing more insulting than somebody saying to you they’ve gotta go to the bathroom and then they go straight to the bar and begin filling up with more liquid!”

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Now most of us in this business are over 21 !! However I am not referring to any extra curicular activites, or for that matter, sex drugs or rock and roll. I am referring to MONEY. Or more importantly LACK THEREOF.

Certainly in the economic times we are now faced with, it is critical we all take a good hard look at our book of business. Certainly past, present, and future. Those of us in the Transportation industry, who are clinging to the liferaft, better just let go and make it to shore safely. In a course, I took many years ago, and in fact every course I have taken since, The theme often repeated, is such that CREDIT IS NOT A GIVEN IT IS A PRIVILEGE. Do not abuse it.

We have many clients, who tell us when our A/R department call for money, my client has not paid me yet. Quite honestly that is not the carrier's problem. You are now our problem. If you are using your clients money to pay Peter, and ROB from Paul, is there any real difference between that and a PONZI SCHEME? I do not see any difference. Other than the fact the Police do not pursue it, YET? In fact FRAUD IS FRAUD any way you look at it. I know of a few companies that have dealt with 3 PL's or Load Brokers, that are disreputable and could not care less about paying bills, double brokering , and hanging carriers out to dry for money.

I think it is time the carriers banded together, started to publish or at least Email, a list of Load Brokers/3P.L.'s / 4P.L.'s or any other such acronym, who hangs a carrier out to dry for money. The faster the better. Eventually, carriers will stop dealing with the few that give the good ones a bad reputation. Does anyone out there realize a B/L is a TRANSFER of TITLE to the ownership of the goods. However this only occurs, once the freight charges have been paid for. This is also one of the many reasons why, cargo claims, are not settled, until the freight charges, have been paid or at least proven to paid for. The Insurance company, cannot pay any one party until they can establish who actually owns the cargo.

Having said that, why do we let all the companies we deal, whether big or small dictate to us as carriers. We cannot tell , INSURANCE, FUEL, LEASING COMPANIES, TRUCK MANUFACTURERS, TRAILER MANUFACTURERS, SATELLITE TRACKING COMPANIES, MANY GOVERNMENT BODIES, OUR INSIDE AND OUTSIDE STAFF, DRIVERS, AND ALL OF OUR SUPPLIERS, I'll pay you next week, my customer did not pay me yet.

WHY SHOULD WE ACCEPT THAT, ESPECIALLY FROM A COMPANY, WHO HAS A LOAD THEY NEED MOVED, BUT NONE OF THE ABOVE COSTS, THAT WE DO. It is high time everyone here took a good strong look in the mirror every morning and liked what they saw. I also attended, the NAL/KRTS/ seminar that was recently held, and was kicked off, by Allie on Networking. Well everyone, Here is a fantastic opportunity, how to start, and avoid going broke at the same time. SHARE THE INFORMATION, we all know who each other are, we all deal with each other every day, we all love the business we are in. Let's go back to basics, and deal with who we want. Remember our job is never done until the money is in the bank and the cheque clears.

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Changes to Ontario’s A/Z licensing requirements, intended to close embarrassing loopholes that were allowing inexperienced drivers to gain their licence after being tested with a pick-up and horse trailer, are having the unintended effect of hurting our industry’s most experienced drivers.

Legislation intended to ensure drivers do not tamper with the speed limiters in their trucks has left Ontario dealers in a quandary about their responsibilities and the Ontario Trucking Association and the Ontario Ministry of Transportation don’t appear to be reading the legislation in the same way.

And we’ve recently heard from environment auditor Scott Vaughn that the federal government has no way to track the environmental benefits of two programs it claimed would contribute to significant reductions in greenhouse gas emissions.

What the heck is going on? Why is our industry being encumbered with what I can only assume is sloppy legislative work that is leading to damaging unintended effects?

You can read all about the changes to Ontario’s A/Z licensing requirements in the Truck News March issue cover story by James Menzies but in a nutshell the Ministry of Transportation now requires drivers to take their road test using a truck with a manual transmission; a fifth wheel coupling; a trailer at least 45-feet long; and air brakes on the tractor and trailer.

That makes a great deal of sense when it comes to ensuring new drivers take a test that properly reflects the working environment many will be facing. But it is frustrating the heck out of senior drivers, who in Ontario must complete a road test every year after the age of 65 to maintain their commercial licence. These are folks with years of experience under their belts. If they’ve moved to an automated transmission for their rig, it was because they believed that to be a smart spec’ing decision for their application; if they’re hauling a trailer shorter than 45-feet in length it’s because the nature of their job demands it. Why force them to have to rent a truck and trailer for the day, every year, in order to take the test?

In the case of Ontario’s speed limiter legislation (also a front page story in this issue), dealers have been left uncertain about whether they’re responsible for limiting the speed of any truck (new or used) to the legislated 105 kmh when the initial delivery is done and what the ramifications would be in the event of an accident.

Meanwhile in Ottawa, the Conservative governments was blasted for pushing through a transit tax credit back in 2006 they claimed would cut emissions by 220,000 tonnes per year but which will in fact amount to about 35,000 tonnes of annual emissions cuts at best (see my blog on trucknews.com).

In all these cases, we are told the matter is “under consideration.” I hope that the politicians and bureaucrats involved ensure that process is a speedy one but also then pause to consider why legislation drafted with the best of intentions so often is having unintended effects. The people being hurt by these measures deserve a quick addressing of their concerns, not frustrating delays and red tape, and an assurance the people we elect to govern us pay a little closer attention to the consequences of the laws they’re enacting.

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There is an old saying that if you fail to plan, then you are planning to fail. The starting point for any trucking company executive in trying to lead his company through turbulent times is the creation and successful execution of a sound business plan. In this blog I will address the 7 elements that need to be in place to achieve great results.

Here they are:

1. Customers
It is customers that ultimately pay our salaries so they must be at the starting point of every business plan. During these difficult times, it is essential to engage customers and remain close to them. They are experiencing similar pressures brought on by the challenging economy. To meet their evolving needs, it is important to understand how their world is changing and how a carrier’s value proposition may need to adapted to current realities. Are customers planning on consolidating shipments on certain days of the week or shifting freight from road to intermodal or focusing more on regional rather than long haul markets? Staying close to customers allows carriers to maintain their business and add business from competitors that no longer have a viable business proposition.

It is also essential to have accurate contribution margins by account and business segment and have them reflected in the business plan. During these times, there is a tendency to add freight at any rate, regardless of the contribution and to jump in and out of businesses without proper analysis.

It is also important to find ways of adding value whether it is providing service in lanes that are not part of the carrier’s current coverage map, or by providing cross-docking or warehousing. This is the time to look at non-capital intensive means of building the business. This can include using agent terminals, contracting line haul transportation to others or providing freight brokerage services, both as a new source of revenue and as a means of meeting the needs of customers that cannot be fulfilled through a carrier’s asset based businesses.

This is the time to fire up sales through a relentless focus on pipeline management. This is not the time to rush out and cut rates indiscriminately since this may turn low margin freight in losing freight and erode the profitability of the business.

2. Employees
It is hard to open a newspaper or turn on a television set without hearing about job cuts. These are going on throughout North America. They key question is who are the employees who should fill the lifeboat if the ship capsized. While some staff reductions may (or may not be necessary) based on projected business volumes, the objective is to retain the best employees, not necessarily the employees with the longest seniority. While employee loyalty is commendable, contributing to a company’s bottom line is more commendable. Rather than across the board cuts, it may make better business sense to bolster the strong segments and make deeper cuts in the weak ones.

This is the time to be creative when it comes to employee retention. Job sharing, cutting back on number of days worked and asking employees to take unpaid vacations are all methods of adjusting staff levels to the available work. The key is to retain the productive employees who contribute to the business plan. Now is the time to replace non-productive employees with the good performers.

3. Capacity
Every trucking company has some capacity constraints. It is essential to look at those variables that impact directly on a company’s ability to generate revenue. They include an assessment of the size, type and age of the fleet, the driver pool (and access to additional driving resources), operating authorities (including the need to service all the locations applicable to these authorities), insurance and a company’s ability to handle overflow. The key is to make a careful assessment of the maximum contribution that can be achieved though the optimization of capacity. It is also the time to carefully assess which vehicles should remain in service and which vehicles should be parked.

4. Costs
There is a need to look at all fixed, variable and overhead costs and to calculate some key ratios.
Total Operating Costs + Overhead / total KM/Yr = Cost per KM
Revenue = Rate per KM X Number of KM
Profit = Revenue – (Expenses + Overhead)

The focus must be on maximizing revenue generating kilometres while minimizing non-revenue producers.
Which costs can be combined, eliminated, outsourced, or converted from fixed or semi-fixed to variable? Realistic budgets must be set and spending on all non-essential items must be controlled. There needs to be a focus on purchases with a quick ROI. Cost concessions should be sought by combining and leveraging outsourced activities with vendors. Cash flow must be managed very diligently. This requires a very intense collections process and a skilful prioritization of payables requirements and timelines.

5. Measurement
Dashboards are helpful in managing each segment of the business. This is where it is important to focus on the critical few KPI’s that mean the most to the business. The short list probably includes employee productivity, sales performance, contribution management, capacity utilization and cash flow management.

6. Accountability
Everyone has to step up in order to achieve results. Every member of the team must have KPI’s that are monitored continuously. Non-performance must be dealt with swiftly and effectively or other members of the team will lose motivation.

7. Results
The first six steps mean nothing if the objectives are not achieved. If a company is not hitting its targets, there is a need to understand the obstacles and faulty assumptions. All excuses must be challenged. The idea is not to placate the “whiners.” It is essential to deal with the real performance issues.

On the other hand, if there are flaws in the assumptions underlying the plan, the plan must be recalibrated to achieve results. If the targets are not being hit, after the plan is recalibrated, then the people issues must be dealt with quickly.

We are not living in a static world. A company’s competitors are out there planning their own initiatives. They are targeting the same good customers and employees. That makes it so much more important that the core strategies be revised and recalibrated (if and when appropriate), to ensure the Business Plan is viable. Addressing these seven items in a systematic way can help trucking company leaders guide their companies through the turbulent times.

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At a recent Driving for Profit seminar, hosted by NAL Insurance and KRTS Transportation Specialists, business networking guru Allison Graham shared some insight on how to network effectively at business functions.

For the second time in a row, I was unable to attend the seminar in person, but thanks to the wonders of TV – or WebTV in this case – I was able to catch all of her engaging presentation on video afterwards. Segments of her presentation will be featured in an upcoming episode of our WebTV program, Transportation Matters, and I encourage you to keep an eye out for it. This is an episode you won’t want to miss.

By way of introduction, Allison Graham is president of Elevate Seminars and Strategic Development, and author of the book Business Cards to Business Relationships; Building the Ultimate Network. During her presentation, she offered insight on common networking mistakes as well as ‘top tips’ on how to get it right.

Business networking is one of those things that seems to come naturally to some, yet poses a real challenge to others. Just glance around the room of any business function and you’ll see it yourself. There are those who glide effortlessly around the room, seemingly at ease conversing with anyone about anything. Then there are those who find it awkward making small talk with strangers.

I’ll break this blog into two parts, focusing first on classic networking mistakes, as outlined by Allison.

CLASSIC MISTAKE #1 – MISSING THE BOAT: Allison explained that too many people show up at an event with unrealistic expectations and if they don’t land a big deal, they feel that attending the event was time wasted.

“It takes six to eight times of meeting somebody casually before they even get who you are,” she suggested.

For starters, when you’re at a networking event, Allison says you must take responsibility for telling people: who you are; what you do; and what you have to offer. The goal is to make someone think of you when they are in need of something you can help them with.

Letting people know what it is you do is important, as there are two primary goals of networking, explained Allison: 1) To be sure that when your contacts have a need you can fill, that they think to call or recommend you first; and 2) that when you have a need, such as growing your business, you know who to call – and when you do, they want to answer the phone.

“The only way that’s going to happen is if people know who you are, what you do and what you have to offer,” she explained. “Once you’re known, you’ll be known for something – you need to determine if that’s a good or a bad thing. Be sure your contacts like you, trust you and they believe you are competent.”

CLASSIC MISTAKE #2 – PUTTING IT IN CRUISE CONTROL: Too often, according to Allison, people tend to cling to people they know when attending industry functions. She said companies will often spend $1,500 to send 10 salespeople to a function, and then they’ll sit together all night.

“That’s a very expensive water cooler conversation,” she pointed out.

She urged attendees to stray from their comfort zone and talk to new people while attending events. She made everyone at the Driving for Profit seminar take three minutes to introduce themselves to someone in the room they didn’t know.

“That’s what we come to these things to do,” she said, “yet when you walk into a room, the natural tendency is to go talk to the people you already know.”

“Each time you go to an event, make it a point…try to come out with two quality contacts you want to follow up with and meet again,” she urged.

CLASSIC MISTAKE #3 – FUMBLING THE FIVE FUNDAMENTALS: Even some very successful senior-level executives struggle with the five fundamentals of successful networking, according to Allison. She laid them out during her presentation.

Fundamental 1 - The handshake: Allison referred to the handshake as the “subconscious communication of your character.” She said to make eye contact while shaking hands. “Eyes are the window to the soul; give people a glance,” she said. “Make it a habit that when shaking hands, you’re looking them directly in the eye.”

Fundamental 2 – Remember their name: Help others out by reintroducing yourself when you meet them for the second time, suggested Allison, and make an effort to remember the names of others. She said we tend to forget names because we don’t pay attention when introduced. Allison suggested taking a mental snapshot of a person when they introduce themselves and then take a moment after the event to think about them and file away their name and face for future reference.

Fundamental 3 – The proper use of name tags: The name tag should be placed on the right-hand side of the chest, according to Allison, since that’s where the eye falls naturally. She referred to the name tag as a “cheat note” on your chest, and suggested displaying it prominently.

Fundamental 4 – Remember your business card: Too often at networking events, Allison said people forget to bring their business cards. When you receive a business card, read it carefully and keep it. Business cards are “the greatest marketing tool you have,” she said.

Fundamental 5 – Follow proper dining etiquette: Allison said finger-licking runs rampant at events where hors d'ouvres and meals are served. “Finger-licking is everywhere. You may not even know you’re a finger-licker,” she insisted.

And many times the first person to sit down at a table grabs the wrong drinking glass or napkin. She pointed out bread is always on the left and water on the right.

In Part 2, we’ll look at three top networking tips offered by Allison at the Driving for Profit seminar. To find out more about Allison, or to order her book, visit www.elevatebiz.ca.

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As many of you know a few days ago I came back from the joyous celebrating of my son’s 10th birthday to the horrible news that my 16-year-old niece, Megan Cherry, was on the missing persons list, listed as an endangered runaway down in Texas.

Her family, friends, local police and the FBI were searching frantically for her but with absolutely no results. As you can appreciate the whole family was worried sick, all sorts of terrible things going through their mind. This was so out of character for Megan, who was a talented teenager showing a world of promise.

Soon as I heard the sad news, I wrote a blog asking for the transportation industry’s help in looking for Megan.

Well, earlier tonight I received the news we have all been praying for. Megan was found and she is safe.

I want to thank all the transportation professionals who e-mailed me with their support and the many others who offered to help by posting my blog on their Facebook page. Our whole family has been so touched by your kindness in this most difficult of times.

For Megan and her family, the next few weeks will I’m sure involve the important processes of acceptance, forgiveness, reconnecting and emotional growth.

But although this particular chapter in Megan’s story has that happy ending we had all been praying for, I don’t want this story to end here. What happened to Megan and her family has brought the plight of parents whose children have gone missing into much sharper focus for me. It has also reasserted my belief that the transportation industry can have a very positive role to play in helping find missing children.

Over the next few weeks I will be looking into how this Web site and our publications can help raise awareness about missing children and use the “eyes and ears” of our transportation professionals to create more happy endings.

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As January 2010 draws near, fleet managers and owner/operators will have to decide between two competing technologies to meet EPA2010 emissions standards. By now, most will know that Navistar is going to ramp up exhaust gas recirculation (EGR) levels in order to become EPA2010-compliant, while all other manufacturers are employing the exhaust aftertreatment system known as Selective Catalytic Reduction(SCR).

Each solution has its advantages and each also presents some concerns.

This is Part 4 in a series of blogs that will address some concerns and/or myths about EPA2010 emissions standards and both of the solutions that will be presented to the market. These blogs will be comprised of information obtained through many interviews I’ve conducted on the subject and plenty of additional research.

If you’re a stakeholder in this debate, and wish to comment on any of the points below, feel free to post a comment. Some spirited comments were posted in response to Part 1 and hopefully those contributors will stick around and answer any questions you may have on the subject of 2010 emissions solutions.

In Part 4 of the series, we’ll look at the anticipated costs of diesel exhaust fluid (DEF), the extra ingredient required by SCR systems.

EPA2010 FACT: The cost of DEF is still uncertain

The expected price of diesel exhaust fluid (DEF) is a tricky topic, because like all commodities, its cost will be dictated by supply and demand. However, at this time, the supply and the demand are both yet to be determined.

Make no mistake, there will be plenty of suppliers stepping up to meet the needs of the industry by producing and distributing DEF. In recent weeks: Cummins Filtration announced it would be providing DEF to the trucking industry; Pilot Travel Centres reaffirmed its intent to sell DEF ‘at the pump’; and Terra Environmental Technologies announced a supply agreement with Brenntag North America.

Availability will not be a concern, but what about cost? In the third segment of this blog series, we looked at the potential fuel-savings touted by engine manufacturers using SCR. Much of the actual bottom line savings will hinge on the cost of DEF – and for that matter, diesel.

(It’s worth noting that since that post, Detroit Diesel unveiled its EPA2010 SCR package to media, and insisted its solution will deliver a 3% NET fuel savings, after taking into account the expected cost and consumption of DEF).

But back to price…what exactly is DEF going to cost?

“We can’t predict what prices will be for DEF or even diesel fuel,” admitted Mark Lampert, senior vice-president, sales for Daimler Trucks North America at the recent Technology and Maintenance Council meetings. “(But) DEF prices will not be the problem that one competitor will have you believe.”

That competitor, of course, is Navistar, which has circulated pictures of a jug of DEF it found near Frankfurt, Germany with a price tag equal to US$12/gallon. However, with suppliers and distributors eagerly entering the North American DEF market, it’s very unlikely that DEF will cost anywhere’s near that much here.

The best guesses at the TMC trade show, according to technical editor John G. Smith, were that DEF will cost between $5 and $6 per gallon, with bulk quantities costing less than that. However, he added “Of course, every price is a best guess. Nobody knows what diesel will cost in January either.”

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This is a blog I never thought I would have to write.

I’ve just come back from celebrating my son’s 10th birthday to horrible news; the kind that every parent fears but can easily fool himself into thinking happens only to strangers, to people you only hear about on the news.

But the sad reality is that tragedy has hit my family and I am asking the transportation industry for its help.

Just a little over a week ago my niece, Megan Cherry, was a teenager showing a world of promise for the future. She was a star soccer player with a scholarship waiting for her at Iowa State University. Now she’s on the missing persons list, listed as an endangered runaway.

Her family, friends, local police and the FBI have been searching frantically for her but with absolutely no results.

I know the transportation professionals who read our publications and this blog travel extensively and see a lot of things while on the road. I hope I can lean on your eyes and ears in the search for Megan Cherry.

Megan is a bright teenager but still naïve in many aspects of the world and may have fallen in with the wrong crowd. Her behavior had been troubling of late and the family is very fearful for her safety.

It was on Friday February 6th that something went terribly wrong. At some point after being dropped off at her school, Allen High School in Allen, Texas, that morning, Megan came back home, packed some of her belongings, and took a family car that was parked in the front of her home. She has not been heard from since.

Yet she had just $30 on her that day. So where could she have gone? Why has she remained out of touch despite having a mobile phone? Is she in danger? Those are the kinds of questions torturing her parents and her family right now. Anyone with a child can imagine what they’re going through. It is now 10 days since her disappearance.

Megan’s mobile phone has been switched off since February 6th, a strange occurrence in itself considering how attached she was to her phone. Police questioning of her friends has yielded little.

Tall, good looking and athletic she would stand out in a crowd. She has black hair with a reddish-golden streak in her bangs. She stands 5’ 10” (178 cm) and weighs 165 lbs with an athletic build. Her ears are pierced and she has a scar on her right ankle.

She may be traveling in a silver 2001 Ford Taurus with Texas license plates JNM 715. It has a dent along the passenger door.

Pictures and more information about Megan Cherry can be found at the link included below.

Anyone who sees Megan Cherry or has any information about her whereabouts, please contact:

National Center for Missing & Exploited Children
1-800-843-5678 (1-800-THE-LOST) or the Allen, Texas Police Department at 1-214-509-4322

I thank you all for your understanding and help. The slightest tip could lead to a happy ending of having Megan reunited with her family.

Continue reading "Transportation professionals: I need your help" »

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There’s no way to hide the troubles facing trucking companies these days. The six executives who candidly share their thoughts about how road transport will be reshaped during the economic downturn in this month’s cover story in Motortruck Fleet Executive certainly harbor no illusions about the tough road ahead.

US GDP contracted 3.8% in the fourth quarter of 08, which was the worst since the first quarter of 1982. In 2008 as a whole, the US GDP grew 1.3%, however if you remove the strong build-up of business inventory from the equation, GDP actually shrunk 5.1%. The Canadian economy is not experiencing the deep issues wreaking havoc on businesses south of the border but we all know the Canadian economy can’t long escape US reality.

Truck tonnage in the US plunged 11.1% in December, which is the largest month-to-month decline since April, 1994 when unionized LTL truckers were on strike. In a recent Webinar, Noel Perry, managing director and senior consultant with FTR Consulting Group, said the US trucking industry has actually been experiencing a freight recession for nearly three years. Our own data has shown that freight volumes and freight rates in Canada have been on the decline (from an admittedly sharp increase starting in 2003 and peaking by 2005). Forty three percent of Canadian motor carriers expect their freight volumes to drop below their already less than spectacular volumes in 2008.

FTR Associates maintains a Trucking Conditions Index which measures many variables that impact the health of the trucking industry. It has fallen to “unprecedented negative numbers,” according to Perry. He compares today’s freight conditions in the US to the last big recession in 1982. And downward pressure on rates is certain to continue. As Perry explained, a huge reduction in fuel surcharges during the fourth quarter gave shippers something to declare victory over but traffic managers are under intense pressure to cut costs and he anticipates the “worst price pressure that fleets have felt in our lifetime.” While our own Canadian data doesn’t paint such a gloomy picture, it does also indicate downward pressure on truck rates. While 47% expect no improvement in their rates and 24% expect rate drops, according to our research.

As a result, Perry anticipates the number of US fleet bankruptcies to “continue and accelerate” over the remainder of 2009 and even into 2010.

And all that is ominous for the share pricing of the continent’s prominent trucking providers. In November, during a session on economic realities I chaired for CITT in Winnipeg, David Newman a senior vice president and equity research analyst with National Bank Financial revealed a sobering comparison. By mid October the value of trucking companies had declined by 32.5%, which is pretty well spot on with what happened back during the 1982 recession.

But as bad as this may be, it can get worse. Many economists believe this will be the worst recession the North American has faced since the Great Depression. That could place the economic pain to be felt on par with what happened back in 1973-75, perhaps worse. And during 1973-75, trucking shares fell an average of 45.4%.
Over the past few months many commenting on the troubles in the motor carrier industry, myself included, have spoken of the cleansing to come; that the current difficulties would rid the industry of those operators who never did adopt successful business strategies and relied on low prices rather than superior service to attract clients. But in his comments on the short term future of the trucking industry Ray Haight, executive director of MacKinnon Transport and the executive director of the Truckload Carriers Association, believes differently. He believes that during this recession we will lose some of the worst operators but also some of the best.

I have a lot of respect for Ray, and I’m beginning to think he’s right.

WORTH REPEATING

“There is a connection between the punch line and the bottom line.”
Adrian Gostick and Scott Christopher,
The Levity Effect

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During my daily meetings and discussions with carriers and shippers, the conversation invariably returns to the state of the economy and how to weather the storm. Everyone is asking the same questions. How long will the recession last? How much worse will it get? What should I do to survive and lead my company through these very difficult times?

The media have also jumped on the bandwagon. A number of articles and books are beginning to appear on this topic. “Managing through a Crisis” was last week’s cover story in Business Week. The highly regarded consultant, Ram Charan, has recently weighed in with “Leadership in the Era of Economic Uncertainty.’ One book that addresses this topic particularly well is “Judgement” by Noel M. Tichy and Warren G. Bennis, a 2007 best seller that contains a good section on crisis management.

In the next few blogs I would like to offer some thoughts on this topic for consideration. I have lived through a number of recessions and crises in my working career. I have had an opportunity to observe what has worked and what has not. Here are a few thoughts.

In their book, Tichy and Bennis outline three approaches that a leader can take in a crisis. These are identified as:
1. The “Ostrich”
2. The “Bull in The China Shop”
3. The “Fox”

The “Ostrich” is in denial. He believes that the recession or crisis will pass and that if he and his company “hunker down,” they will survive. He adopts a “business as usual” approach, hoping that the strategies of the past will suffice in the present and future. By taking this posture, these companies often act too late and their efforts are often ineffective.

The “Bull in the China Shop” panics. He takes drastic action without fully thinking through the consequences of his initiatives. This may include “firing” the wrong customers or terminating the wrong employees or closing the wrong terminals. Frequently these decisions come back to haunt the company. How often have you seen a trucking company de-market an account (e.g. large rate increase, stop serving the customer) and then have second thoughts about what they have done?

The “Fox” “keeps his cool” and thinks through the situation. Based on a well thought out and deliberate plan, the leader takes calculated steps to cut non-essential costs and add profitable business. The fox also recruits quality employees and customers from a rival and/or possibly makes a strategic acquisition, strengthening the company in the short and long term.

Companies that are successful in surviving and prospering during a crisis employ a number of strategies.

They engage their Boards, Mentors and Customers
The service requirements of trucking companies often change in a crisis from what is expected in more “normal” times because the needs of their customers change. Good companies listen carefully and stay close to their customers. They adjust their business strategies and operating processes to meet the changing needs of their customers.

They also listen to their boards and mentors. They consider what has or has not worked in the past. They utilize the wisdom of their boards and mentors to test out new business strategies.

They engage their Employees and Create a Fact-Based Plan
Successful companies take a fact based look at their resources and capacities, their people and the state of their finances and craft a solid plan. The plan is developed by the leadership team and executed by the leadership team with the support of the entire team.

They Act Decisively
Cost cutting is done in a well planned decisive way. Rather than handing out a set of pink slips every Friday afternoon, the cuts are identified and done quickly and methodically. This reduces the “water cooler” discussions and allows the company to move forward confidently with its business.

They Communicate
Through town hall meetings, lunch room meetings and one on one discussions, their employees are kept informed. Moreover, they are actively engaged to be part of the solution. This is extremely critical since this is an unsettling time. Some reassurance from the company leaders can go a long way towards maintaining morale and productivity.

They Capitalize on Opportunities
During a crisis, some companies stumble. Some key employees and customers get “nervous” and become vulnerable to competitive overtures. This is the time for bold action that enhances your company’s bottom line and future growth. Some of these opportunities may never surface again.

It’s not about the economy; it’s About You and the Leadership you provide
These are the most difficult times many of us have faced in our working careers. “Keeping your cool” and executing a well designed plan can help you lead your company through the turbulent times.

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There’s a funny thing about numbers: they often prove a double edged sword.

In the hands of politicians they can be used to confuse issues and add seeming credibility to the most preposterous of ideas. In the hands of an auditor, they can be used to bring a government to account.

That’s exactly what happened in Ottawa this week when the federal environment commissioner released an audit of various government programs put in place to reduce air emissions. Considering transportation’s contribution to greenhouse gas emissions (25% of the total contributions) our industry is certain to come under increased scrutiny in the future so environment auditor Scott Vaughn’s scathing audit of existing programs is something in which transportation professionals and stakeholders should take a keen interest.

In a nutshell, Vaughn’s audit found that the Conservative government has no way to track the environmental benefits of two programs it claimed would contribute to significant reductions in greenhouse gas emissions. Specifically, the Conservatives pushed through a transit tax credit back in 2006 they claimed would cut emissions by 220,000 tonnes per year. Yet Vaughn concludes that in fact this tax credit will in fact lead “lead to negligible reductions” based on the government’s own estimates. From their initial claim of a reduction of 220,000 tonnes each year from 2008 to 2012, the Conservatives had to drastically downgrade their own estimates of average annual reduction to 35,000 tonnes.

Just as bad, the means necessary to properly measure the actual impact of the tax credit have yet to be created.

The environment commissioner’s audit also found “no scientific basis” for the government’s claim that a $1.5 billion climate-change fund for the provinces will result in an 80-megatonne cut in emissions.

How can the government possibly be that far off in their estimates? Can you imagine how safe your job would be if your estimates of future growth or costs or whatever were that far off?

It’s not Vaughn’s job to comment on what he thinks caused such as shameful difference between government estimates and reality. But I’ll take a stab at it. Perhaps accuracy was not a major consideration when the Conservatives began touting the public transit tax credit? Perhaps it was politically expedient for a party that back in 2006 was looking to attract more of the urban vote and recognized spending on transit as a time-proven way to entice urban voters.

But the end result is more government waste and a loss of credibility for the government’s environment plans at a critical time.

Remember, this is the same party that during the debate a couple of years ago over whether Canada should start living up to its Kyoto commitments produced an analysis that claimed that by 2009, over 275,000 Canadians would lose their jobs, electricity bills would jump by 50% after 2010, prices at the pump would shoot up by 60%, and natural gas prices to heat homes would double, if they had to meet their Kyoto Accord targets for reducing greenhouse gas emissions. This is a government used to playing loose with numbers when it wants to.

Lest you think this another stab at the Conservatives (a party for which I readily admit to having worked for on a volunteer basis in the past but which I have come to loathe in recent years) I’m not sure the Liberals would have done much better. The reality is that despite three national emission reduction “plans” – “wishful thinking” would be a more appropriate word considering all the effort that went into them – dating all the way back to Jean Chretien’s Liberal government and Brian Mulroney’s Conservative government, all we’ve done over the past 20 years is watch our GHG emissions climb relentlessly. Overall, we are on track to be about 30% above the Kyoto Protocol target for 2010.

Yes, our booming economy (remember those days?) was part of the reason why for the increase in GHG emssions, but Ottawa’s failure to lead was also a significant contributor to the mess we are in. And leadership and accountability go hand in hand.

As the environment commissioner noted in his report: “Canadians expect the government to tackle environmental degradation. The government needs to know what works, what doesn’t and why.”

His comments are only common sense. An issue as important as the environment should not be politicized. Both the public and the transportation industry stakeholders who will be feeling the pain deserve to know the government knows what it’s doing rather than cooking up numbers for political gain.

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As January 2010 draws near, fleet managers and owner/operators will have to decide between two competing technologies to meet EPA2010 emissions standards. By now, most will know that Navistar is going to ramp up exhaust gas recirculation (EGR) levels in order to become EPA2010-compliant, while all other manufacturers are employing the exhaust aftertreatment system known as Selective Catalytic Reduction(SCR).

Each solution has its advantages and each also presents some concerns.

This is Part 3 in a series of blogs that will address some concerns and/or myths about EPA2010 emissions standards and both of the solutions that will be presented to the market. These blogs will be comprised of information obtained through many interviews I’ve conducted on the subject and plenty of additional research.

If you’re a stakeholder in this debate, and wish to comment on any of the points below, feel free to post a comment. Some spirited comments were posted in response to Part 1 and hopefully those contributors will stick around and answer any questions you may have on the subject of 2010 emissions solutions. I should also note that, while it’s a bit like talking to myself, I added a comment to Part 2. Rather than end the post with a question, I felt it behooved me to ask that very question and I have posted the response. It may be worth taking a look.

In Part 3 of the series, we’ll explore how SCR and Navistar’s EGR approach measure up when it comes to fuel consumption.

EPA2010 FACT: SCR will deliver better fuel economy than EGR

I’m wading into murky waters with this post. I’ve labeled the claim that (Selective Catalytic Reduction) SCR will deliver better fuel mileage than a non-SCR approach as FACT – and it is. It’s one of the strongest value propositions behind SCR. But while even the Navistar camp concedes SCR will consume less diesel, it counters that a like amount of diesel exhaust fluid (DEF) will be required by trucks using SCR, essentially nullifying the cost savings.

Proponents of SCR say their EPA2010 solution delivers anywhere from 2-5% better fuel economy than a non-SCR alternative. A 2-5% fuel savings is no small thing. By Cummins’ estimation, if averaging 6 mpg, at 120,000 miles per year and $4/gallon diesel (it will surely return to that level eventually), every 1% of fuel savings is worth $800 per truck per year. So a 5% fuel savings can add about $4,000 per truck to the bottom line each year. That’s a figure that’s hard to ignore, especially when extrapolated over a fleet.

The fuel savings is mainly due to the fact SCR users can reduce EGR flow rates, recovering some of the fuel economy they lost when they first introduced EGR in 2002 and then boosted EGR rates in 2007. Reducing EGR levels will allow engine manufacturers using SCR to tune their engines for optimum fuel mileage, since they can produce as much NOx as they want in-cylinder, and eliminate it downstream in the SCR catalyst.

With (advanced/massive/mature – call it what you will) EGR, on the other hand, NOx is being reduced in-cylinder so Navistar does not have the luxury of dialing back EGR flow rates - in fact it will increase the amount of gas being recirculated back into the cylinder by about 10%.

SCR backers also point out that NOx plays an important role in the efficient regeneration of the diesel particulate filter (DPF). They say they will nearly eliminate active DPF re-gens (which of course, consume fuel) and have questioned whether an in-cylinder solution will allow for the passive regeneration of the particulate filter.

Navistar officials I’ve spoken with concede that SCR will deliver better fuel mileage than its own solution, if by ‘fuel’ you mean ‘diesel.’ This is where the issue gets a little cloudy. Navistar says that its engine and an SCR engine will consume about the same amount of ‘fluid’ as they travel down the road, when you take into account that diesel exhaust fluid (DEF) will be consumed at about a 2-3% ratio (vs. diesel).

So, while engines with SCR will use less diesel fuel, it’s possible that the consumption of DEF will offset any cost savings. When measuring operational costs, one must consider the cost of DEF. If it will cost less than diesel, it stands to reason that SCR will, in fact, deliver the lower cost of operation. On the other hand, if DEF costs considerably more than diesel, then the fuel economy benefits touted by the SCR camp may be for naught.

In the next installment, we’ll look at the anticipated cost of DEF and its impact on overall cost of operation.

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