CSCMP panel examines the State of the (transportation and logistics) union

A number of key topics impacting the freight transportation and logistics marketplace were front and center at a panel at the Council of Supply Chain Management.

The panel, entitled, “State of the Union––Transportation Industry Executive Panel, was moderated by Matt Menner, senior vice president at Transplace and was comprised of Tommy Barnes, president of Con-way Multimodal, Craig Harper, chief operations officer, J.B. Hunt Transport Inc., Michael Miller, chief commercial officer for Genesee & Wyoming Railroad Services Inc. and Paul Svindland, CEO for EZE Trucking Holdings Inc.

When asked about current market conditions in their respective sectors, the panelist were largely positive, given the slowly developing economic momentum at the moment, coupled with volume gains across different modes in 2014, too.

Svindland explained that the last four-to-five years have been “absolutely brutal” from a carrier’s perspective, but noted that the tide is turning and shifting to more of a carrier’s marketplace, which has resulted in EZE, a hauler of flatbed and complicated heavy and over-dimensional inter and intra-state moves, able to get rate increases easier than it has been in the past, which, in turn, allows EZE to efficiently invest in its business in orders to get drivers and address insurance costs as it relates to his company’s specialized equipment.

Con-way’s Barnes highlighted the good with the bad, when it comes to assessing the industry’s temperature.

“There are many signs that the economy is positive, with a stabilization evident more so than in recent years,” said Barnes. “We are all bullish but yet cautious, because there are still some risks regarding rising attrition rates and economic fundamentals that could impact the broad economy. If we can get back to 3 percent GDP growth, it will bode well for the entire economy.

Like Svindland, Barnes agreed that it is becoming a carrier’s marketplace, and one that is likely to be more balanced than it has been in the past.

But unlike in the past, the possibility of not enough drivers and tight capacity has not materialized until now.

“The industry is short on drivers in a bad way, and as the economy improves that will pull even harder on [providers],” he said. “We have to get more creative in ways to serve shippers. If there is meaningful GDP growth in 2015, it will be a tough environment for shippers; it may go from cost and service to risk and risk mitigation, which is a different discussion than ones we have had in the past.”

Optimism was in the forecast as well for J.B. Hun’s Harper, too.

Harper is optimistic about the economy, explaining there is ongoing evidence things continue to improves, especially in the form of growth in all of Hunt’s business segments, which has seen the company spend more than $700 million in 2014 capital expenditures, with much of that capital allocated for containers and trailers (its fleet asset count is currently around 91,000).

Even with optimism and expected growth in each of his company’s segments––7-10 percent for intermodal, 10-12 percent for dedicated, 4-6 percent for truckload, and 20-35 percent for integrated capacity solutions––Harper remains especially worried about the truck driver shortage.

“The driver situation is real and close to me,” he explained. “I have been hiring drivers at JBH since 1997 and this is the toughest market I have ever seen bar none. It is a real challenge and we need to figure it out on driver side and cost side for truck and rail, but we are optimistic about the future.”

GWR’s Miller commented that domestic intermodal growth will outpace GDP and has been for a while, as intermodal volumes did not materially dissipate during the life of the recession. But at the same time volumes are still not at 2003-2006 peak levels, although he said 2015 could potentially surpass those previous highs.

Miller said that the challenge is not solely due to demand as it is the ability to meet demand in terms of agility, with the anticipated $23 billion-to-$24 billion invested by railroads into infrastructure between now and 2015 is largely related to keeping up with physical needs, which is key for short lines adding capacity.

What’s more, the momentum from crude oil-by-rail moves and other related efforts within the energy sector have changed rail traffic flows in the northwest to a large degree, he explained.

“[CBR] has chewed up a lot of capacity that has traditionally been there in the upper Midwest and the Bakken crude area,” observed Miller. “Those rail networks are basically sold out. It is amazing how much volume is being pushed through there compared to 3-4 years ago. With frac sand, 5 years ago it would take 30 cars to frac a well and due to different technologies and the ability to put more sand in the hole it can take 90-100 cars in one well being frocked. The real challenge is how to meet demand by putting additional people to work, velocity, adding new equipment and infrastructure.”

Overall, Miller said intermodal networks are very well defined from terminal to terminal and on those corridors over the last three-to-five years tremendous amount of investments being made through the Department of Transportation’s TIGER investments and terminals being developed. That is not where capacity constraints are; instead, he said the main issue for intermodal networks is to find ways to them to flow better and make sure assets are turning efficiently.

Another theme during the session had to do with working with what Hunt’s Harper called the shipper of choice.

Harper said that means collaboration between shippers and carriers though freight lanes, looking at waste in the system¬¬––like idling time and backhaul strategies to drive out empty miles––and driving efficiency.

Con-way’s Barnes cited how the shippers that act with strategic responsibility and are equipped with a multiyear plan to share with providers are the ones that will be secure long-term. Conversely, though, he said that the “punitive” shippers, or ones that are focused on price more than fostering a relationship or service quality are the shippers that are vulnerable.

“When both parties open up, the better the relationship gets,” he said. “There has to be a definitive level of trust and shared vision that needs to be reciprocated and leads to more open dialogue and to make sure goals and needs are aligned.”