Trends in Truckload Shipping and Workforce Issues:
Real Impacts, Real Responses,
Real Estate Implications
Jim Reeb
Business Consulting Partner
Pete Quinn GSCS
Senior Managing Director
A Recent Survey Of Fortune 500 Executives Asked
Each “What Are Your Company’s Biggest Supply
Chain Issues?”
WHAT ARE THE BIGGEST SUPPLY CHAIN ISSUES?
Source: Eyefortransport.com
Major Macroeconomic Trends Impacting The
Trucking Industry

Increased demand for shipping capacity. Continued strong growth in global and domestic
market economies has continued to put pressure on the transportation industry

Higher fuel costs. Fuel costs represent as much as 25% of total operating costs; a one cent
increase in fuel costs has a significant impact on slim profit margins

Emphasis on quality of life. Drivers are opting for a better quality of life. Drivers’ lifestyle
issues have made this profession seem less appealing. The average age of a driver is now
approaching 55 years, and fewer new drivers are entering the workforce.

Globalization. The rising levels of global sourcing and increased import customer demand are
putting significant new strains on the trucking business

Environmental and Regulatory Changes.
–
–
Environmental: Over the last 10-15 years, the level of investment in the U.S. transportation
infrastructure, in our roads and bridges, has not kept pace with commercial growth. In addition, more
recently, the weather has wreaked havoc
Regulatory: Hours of Service regulations. Driver productivity has been affected by a minimum of 2 to
4%. Class 8 truck production has risen in advance of 2007 emissions requirements.
Impact On The Trucking Industry




Higher Rates
Deteriorating Service
Not Enough Drivers
Capacity Shortfall Overall
Interstate Highway System

50 years of growth and expansion. Major metro areas are critically congested
Congestion Tripled in 20 Years


The nation’s road system has been experiencing steady growth in congestion levels in recent decades, particularly in
urban areas. Plans for the expansion of existing road networks often attract accelerated residential and commercial
land development in the areas to be serviced by the roads.
As a result, the capacity of the new roads are heavily taxed as soon as they come on line. In a distribution
environment marked by increasingly tight delivery schedules and a relatively tight market for truckers, road
congestion is highly disruptive and costly
The Impact on Shippers and
Transportation Management

Increased Emphasis on Private Fleets and/or Tailored Dedicated Services

Investments in Technology

More Transportation Management Outsourcing

Increased focus on inbound

Focus on OAE – Driver/Truck

Focus on OAE: Network Productivity

Focus on Security
Potential Real Estate Market Impacts

Facilities need to be able to ship 24/7. Hours of operations for industrial real estate need to be optimized to increase driver
productivity. Going forward, site selection work for new facilities should always consider any constraints on hours
of operation.

Ease of access is more important than ever. You simply can’t afford to have drivers wasting time lost or in traffic, or driving 15
minutes from the interstate to your location. Also, facility layout, space, hours of operation and design need to support increased trailer
drops and hooks.

Driver amenities may be a facility feature. Becoming a driver-friendly shipper may mean more than just a restroom. Vending,
receiving, upgraded facilities and even a dedicated lounge for drivers at your warehouse could make a surprising impact on the
desirability of your freight.

The labor market dynamics of a facility are important. When working on a site selection initiative, labor resourcing is always critical.
Particularly if you plan on contracting dedicated services or running a private fleet, facilities near larger pools of driver labor may be
more valuable in the long run.

Look more carefully at total miles during your next network design or rationalization project. Make certain you are properly
evaluating network structure to assess tradeoffs between reducing total network miles and adding/relocating facilities.

Facilities with access to multiple/alternative modes (e.g. intermodal, boxcar) need to be fully leveraged. Facilities may have “rail
access” even if rail access is not nearby. A short haul truckload move to an intermodal ramp 60 miles away which facilitates a cross
country intermodal shipment, instead of a 2,000 mile dryvan over-the-road haul, may now be more beneficial than 5 years ago.

Greater customer pick up (CPU) availability is a facility feature.

Demand for larger buildings where more freight can be consolidated and controlled is rising. DCs are getting larger. We are
seeing a proliferation of consolidated Regional DCs for retailers with scale of 1.5 million SF plus.

Location strategies are changing, in many of the ways discussed, but in general there is quite a debate around the wisdom of locating
distribution centers in more remote areas. Yes, congestion is a major issue, but so is total miles hauled. More development has been
moving out of congested areas, to the suburbs of Tier 1,2 cities, and to Tier 3 and 4 cities. There is no easy answer to what works here,
but the point is your approach to answering this question must be an integrated analysis of total labor costs, total freight costs (including
those embedded in delivered pricing)
Market Update
8
NOTES:
7
 TL prices did go down last quarter, by
0.1%, but remain on the rise yearover-year
6
5
 Increases are expected to remain in
the 3-4% range through 2007
4
 There was a modest decline in the
pace of demand increase in the
middle of 2006, but no change to
supply; fundamental market
imbalances are expected to remain
into 2009 or 2010
3
2
1
0
2002
2003
2004
2005
2006
2007
-1
Actual
Source: Logistics Management
Forecast
The Poor Getting Poorer
NOTES:
4.6%
5.2%
3.6%
• Freight Management classifications
set from metrics of The Aberdeen
Group, 2006
• Freight Spend as a % of sales
• “Best in Class” has a predictable
69% advantage in freight spend
vs. “Laggards”
Best in Class
Industry Average
Laggards
Comparing Freight Savings Opportunities
OPPORTUNITY
Easier to
Execute
1
2
3
5
6
7
4
10
8
9
Percent Savings
Higher
Bubble Size = Expected Absolute Dollar Savings
Source: CH Robinson
1
TL Benchmarking
2
TL Weight/Cube Benchmarking
3
TL Bids
4
Routing Enforcement, etc.
5
Simple Order Consolidation
6
Pool Points, Cross Docks
7
Multistops
8
Continuous Moves
9
“Tours”
10
Network Modeling
GSCS Custom Solutions Are Often The Most
Appropriate Choice For Highly Complex Categories
Such As Transportation
SOURCING CHARACTERISTICS
• Complex baselining process
— Multiple data sources
— Hundreds of thousands of records
— Complex calculations to identify and isolate
baseline volumes and spend
— Varying service levels
• Thousands of lanes or items to bid
• Often times higher spend categories: $15 MM +Up to
hundreds of suppliers
• Complex bid parameters such as:
— Multiple rates per item depending on service level
— Commitments at a detail level
— Discounts on supplier chosen bundles of
lanes/items
• Typically multiple rounds of negotiations/bidding
TRANSPORTATION CATEGORIES TYPICAL SAVINGS
5% – 9%
6% – 12%
5% – 10%
Logistics Network Modeling
Introduction
Successfully designing and implementing a high performance network of facilities requires a
combination of data driven engineering solutions, operations knowledge and breakthrough
thinking capability. Facilitating contribution from all functional areas within an organization is
also integral to designing a network of facilities that will service the entire supply chain.
Building upon a “hands-on” operations base, we have established a highly respected
consulting capability in supply chain strategy and logistics. Logistics Network Modeling
is the cornerstone of our supply chain strategy and logistics practice.
Benefits include:
What is Logistics Network Modeling?
 Typical savings between 5% to 15% of logistics costs including:
 Transportation savings
 Fixed facility cost savings
 Labor savings
 Inventory savings
 Potential service improvements including:
Our network modeling technology of choice is a true optimizer ensuring that the
generated solution represents the least cost solution. All costs and constraints
including opening or closing facilities, throughput capacities, customer service
limitations and product eligibility are utilized.
– Reduced order lead time
– Improved order and line item fill rates
 Ability to quickly test alternative operating scenarios
Although the project, network and strategic objective differs for each client,
we utilize network modeling technology to answer the following:
 Reusable tool to model future business changes
 Itemized costing within the supply chain
 Catalyst for communication across the organization
SOME OF OUR CLIENTS INCLUDE:
Lowe’s
Alcon
BIC
Tesa Tape
Kraft Foods
Hershey Foods
Quaker Oats
Deluxe Checks
Procter & Gamble
American Standard
Johnson & Johnson
PepsiCo Beverages Intl.
Logistics Network Modeling is a strategic study capable of evaluating millions
of variables within different supply chain echelons including:
 Product sourcing costs
 Inventory carrying costs
 Fixed and variable facility costs
 Inbound, transfer, and outbound transportation costs
Ames/True Temper
Ferguson Enterprises
Western Auto Parts
Boise Office Products








Number of plants and distribution centers
Location of plants and distribution centers
Product mix by plant and distribution center
Sourcing decisions for distribution center replenishment
Customer assignment to distribution centers
Evaluation of alternative transportation schemes
Evaluation of alternative distribution philosophies
Evaluation of customer service levels
Our Approach Looks At Recent Regulatory, Economic,
Security And Other Impact Areas To Understand Core
Issues Driving Industry Volatility
Competition
Capacity
Constraints
Recession
Transportation
Industry
Technology
Regulations
Security
While these factors create tension in the market place, they have also created opportunities for improvement.
Many companies are now looking for help in transportation sourcing
Try Using This To See Where You Stand
Human Resource Strategy
Workforce Shortage



The EPF (Employment Policy Foundation) projects a shortage of several million
workers the decade
10 Million by 2015
35 Million by 2030
Diagnosis Step 1.
Current Workforce Profile
Current Work Processes
Value chain map of client’s work floor
and/or order-to-cash process. What
happens at each step, type of work
and work skill at each step. Worker’s
job title at each step. How value
is added or how risk is involved in
each step.
Current Worker Characteristics
Current Workforce Profile
 Work Processes
 Worker Characteristics
For each worker in the current facility, the
job title (should link with the job
titles in the work process diagnosis), date
of hire, age and sex, wage, extra
compensation, etc. Worker address. etc.
Source: C&W Consulting Employee Data
Request form.
Source: Full-day seminar with client
operations team, white-board
sessions, workplace/work floor walkthrough, observing, questioning.
Draft the work flow in a flow chart. Show bottlenecks, etc.,
Show where (work process or station) client is at risk if
something goes wrong, and where client can add value
and/or gain efficiencies.
Go back to client operations team and get reality check and
plan new work process design.
Geocode employee addresses
Map the addresses and compute
commuting times.
Obtain the 30+ “extended variables” for
each worker at block group and ZIP Plus
4 levels, from Claritas.
Design Template Step 2.
New Design Workforce Profile
New Design Work Processes
From the New Design Value chain map
that the client wants to achieve at the
new location, what is type of work, and
work skill set at each step. Worker’s new
job title at each step.
Source: The second seminar with client
operations team.
New Design Worker Characteristics
New Design Workforce Profile
 New Work Processes
 New Worker Characteristics
For the new jobs and skill sets,
determine with the client whether they want
to (a) grow a workforce (hire inexperienced
workers and train them)
or (b) capture a workforce (hire workers
already employed in same or similar jobs in
other companies.)
Determine the likely life-cycle and life-style
characteristics of workers with those skills
and level of pay.
Source: C&W Consulting Proprietary Work
Style –Life Style models.
Translate the new job titles and skill sets
to Standard Occupations.
Identify the industries that hire the
majority of these occupations.
Sources: US DOL BLS Standard
Occupation Classification; Occupation
Employment Statistics (BLS) crosswalk to
Industries (NAICS)
Triage Step 3.
Classify Occupations in the Workforce Profile
Career Occupations (30%)
Long training period. Graduate Education
(2-7 yrs), Certification Often
Translate the new job titles and skill sets
to Standard Occupations.
Classify the occupations into the three
Career Classes.
Sources: US DOL BLS Standard
Occupation Classification; C&W GBC
Occupation Career Class Table
Quasi - Career Occupations (39%)
Basic Education, + Specialized training (Often
OJT) (1-2 yrs)
Non - Career Occupations (31%)
No special education, on job training
(few weeks)
We Start With The Full Standard
Occupational Classification
Occupation Code
Career Occupations (30%)
Quasi - Career Occupations (39%)
Non - Career Occupations (31%)
Occupation Title
15-0000
Computer and mathematical occupations
17-0000
Architecture and engineering occupations
19-0000
Life, physical, and social science occupations
27-0000
Arts, design, entertainment, sports, and media occupations
11-0000
Management occupations
13-0000
Business and financial operations occupations
23-0000
Legal occupations
29-0000
Healthcare practitioners and technical occupations
21-0000
Community and social services occupations
41-0000
Sales and related occupations
43-0000
Office and administrative support occupations
47-0000
Construction and extraction occupations
49-0000
Installation, maintenance, and repair occupations
31-0000
Healthcare support occupations
33-0000
Protective service occupations
35-0000
Food preparation and serving related occupations
37-0000
Building and grounds cleaning and maintenance occupations
39-0000
Personal care and service occupations
45-0000
Farming, fishing, and forestry occupations
51-0000
Production occupations
53-0000
Transportation and material moving occupations
Next Steps


Develop strategies for targeting, recruiting and retaining employees
Use of psycho-demographic profiling within the HR function to improve
organizational productivity
HR Strategies Based On Segmentation
C&W locates the rooftops of your target
profile employees
“Marketable Intelligence” reaches into the home of your
target profile employees
Media
Preferences
Target
Profiles
 Who are your existing
employees
 Who are your target
profiles
Neighborhoods
in Which the
Targets Live
Collateral
Creative
Direct Mail Lists of
Households
Product and
Lifestyle
Preferences
 Where are they located
 How can you enhance
retention/engagement
Prizm Household
Segmentation
System
Collateral
Printing
Target Profile
Employed
Collateral
Delivery to
Households
Target Profile
Validation
Employee Retention


Further understanding what the workforce values culturally and with respect to
recognition can enhance employee engagement.
PRIZM data can be linked with purchasing behavior preferences to target
recognition programs.
Employee Recruitment
Human Resource
Media Campaign Decision Model

How do you reach the target profile?
– Implement strategic targeted recruitment programs to attract employees of the
target profiles.
Strategic Use of
Marketable Intelligence
Direct Marketing Targets
National Media Targets
Saturation
Local Media Targets
Target Profile Thematic Mapping


Where are the targeted employees?
Target Profile Thematic Mapping identifies neighborhoods in which and the
concentration of the target profile classes
– Expansion Cities Example
• Minneapolis
Minneapolis Thematic Map –
Professionals
Minneapolis Thematic Map –
Steady Strivers
Minneapolis Thematic Map –
Augmenters
Minneapolis Thematic Map –
Stabilizers
Minneapolis Thematic Map –
Interluders
National Media Targets

The preference data includes media preferences and purchasing behavior.
– This information can be used to inform a client where to place its advertising and how to
shape the content, to most appeal the employees (who) are typically profiled within their
productive workforce.
– Additional media planning consultation can assist with the timing (when) of ad placement.
“The Active Way to Recruit”

Develops a list of specific households based on target profile
– Based on PRIZM codes and a variety of other data sources are obtained.


Recommends a media campaign to target those potential employees.
Coordinates and Implements:
– “Creative” collateral development based on target
– The mailing of the material
– Ad placement in media, on internet and other forms
Additional Reading

Workforce Crisis by Ken Dychtwald