I recently interviewed several transportation and logistics service providers whose companies have routinely been named to the prestigious list of Canada’s 50 Best Managed Companies. They shared many insights about how to remain profitable during times of intense fiscal difficult and how to approach the new growth period. I will be sharing their insights with you over the next few columns. We start with MSM Transportation’s Bob Murray.
Q: For the past two years both shippers and carriers have placed an emphasis on cost reduction, perhaps more so than at any time during recent memory. With the economy starting to rebound, do you see the emphasis changing?
Murray: Yes and the reason is that the smarter companies out there have a huge investment in their future footprint in the marketplace and they are looking more to secure capacity today with a focus on value for their dollars spent. The shift is actually from cost reduction to cost control and value. That’s what we have been experiencing with our client base.
Q: How is MSM responding to the new reality?
Murray: We have been working with our customers on identifying and controlling cost drivers. There is a tremendous amount that customers can do to control their own costs. A lot of the costs that are associated with transportation are driven by the dynamics of their own systems, suppliers or their own customers. Many shippers may not realize they do have control over those cost drivers, so we have been working with our customers to help them identify those cost drivers and control them.
Q: How do you address situations where the shipper may not have adequate data to identify practices that are adding to costs?
Murray: Sometimes, even when they have data, it’s hard to get to the cost drivers. You really have to get to the field level and operations to understand what is driving costs. It could involve talking to the people handing freight on the dock and our own operational people who are moving the product. When you pull them all together, you may find there is a tremendous amount that can be done to control costs.
Q: One of the most striking developments during the recession was the placing of increased amounts of freight on the spot market. Industry indexes show that is continuing today. Is this shipper focus on the spot market a trend that is here to stay?
Murray: Certainly technology has brought the ability to attain those spot quotes quickly and that has boosted the use of the spot market. Many companies view the shipping rate as an area to save money but in reality this practice is going to cost shippers significantly over time. Spot quotes are reactionary. When you are requested to place a spot quote you generally don’t have a great deal of information – you don’t know anything about the cost drivers and there is usually very little engagement prior to the spot quote. When a shipper is proactive and works closely with a transportation solutions provider there is a tremendous amount that can be done, as I’ve already mentioned, to identify and deal with the cost drivers. This way cost reductions become sustainable over the long term. The spot market will probably continue to be strong as we work our way through imbalances but it is not sustainable over the long term. In fact, in some cases, it may not even be repeatable.
Q: During the recession, severe revenue drops forced many fleets to reduce spending in a variety of areas, and in many cases customer service suffered. MSM, however, continued to receive very high marks from shippers in our annual Shipper’s Choice award and catch the eye of the judges once again to be named one of Canada’s 50 Best Managed Companies. How do you manage to keep expenses in check without allowing customer service to suffer?
Murray: We also looked closely at our costs; it was the only way to survive. But good customer service to us is part of our culture and our systems. We registered our Quality Management System back in 1998 and adopted the ISO Quality system as a framework to document and drive continuous improvement. The focus of our quality system is customer satisfaction. Every system that we employ at MSM is documented, tested, retested and more importantly undergoes continuous improvement which is captured. Over the 13 years that we have been employing this quality system, MSM has been able to improve our best practices.
Q: What do you see as the main challenges ahead?
Murray: We are all trying to find what this “new” economy will be all about. We are all hoping for a full and strong US recovery because we should not kid ourselves, three quarters of Canada’s trade is with the US. By applying what we already know about customer service, we have been able to double our sales within both divisions and we feel very optimistic that this growth trend will continue.
Q: MSM both fine tuned and expanded its service offerings in recent years. How are those changes evolving?
Murray: We had tremendous success last year with two of the larger initiatives which we took on: MSM US Domestic, which operates out of California, and MSM Worldwide. We doubled our sales last year on both fronts and we are really starting to gain some traction on those new markets for us.
Q: MSM is heavily involved in transborder trade. What impact do you see CSA 2010 having on Canadian fleets such as yours operating stateside?
Murray: We operate in California, which is known as probably the toughest jurisdiction to operate in. We have always supported the CSA initiative and have always followed the rules so the impact to our operations is very minimal. We are hoping that the initiative will help remove the carriers who cut corners and refuse to play by the rules. As a shipper, you really have to watch who your transportation providers are because the US is taking the CSA initiative very seriously and have put resources towards enforcement. Shippers working with carriers who are not focused on safety may find they will need to look for new transportation providers.
Q: How much of an impact do you realistically believe a driver shortage will have on carrier growth plans going forward and what is MSM doing to ensure it attracts and retains its employees?
Murray: We have been talking for 20 years about the driver shortage, although most of that was initially in the US. We’ve been really successful with our drivers and owner/operators. Our turnover is almost nil and the only magic is that we simply treat them as one should treat people: with dignity and respect. We hold them in high esteem and we make sure they know that. A lot of our recruiting is done simply by people listening to what our drivers and owner/operators have to say about working at MSM.
I will be back with the insights of another executive in my next blog. In the meantime, if you have a real interest in how to grow your company in the new economy, be sure to attend our third annual Transportation Company Workshop, set for Wednesday, May 25th at the Capitol Centre Banquet Hall in Mississauga. (click here to register: https://www.trucknews.com/workshop/ )
Once again we have partnered with Dan Goodwill and Associates to put together a comprehensive agenda to help you revitalize your transportation business in this time of economic uncertainty and technological change.
We are going to take a deep dive into how to improve the profitability of your transportation business through better information management and by going into detail about how to best approach e-tenders and RFPs.
I will personally be hosting both a retailer and a manufacturer roundtable this time and you will hear first hand from some of the nation’s largest shippers about what they expect in 2011 , both in terms of shipment volumes and their expectations from carriers. I will also host a motor carrier roundtable to discuss successful business development strategies.
And, of course, we will start the morning with the latest economic overview from Scotia Bank’s senior economist, Carlos Gomes. Carlos didn’t flinch with his cautious but optimistic approach last year when others were predicting a double dip recession and he’s been proven right. This year we also have a great close with a session on Customs, with government officials from CBSA going over key changes to border legislation.
Business success in the future will require an integrated communications strategy and increasingly this means using social media. Our workshop includes a session on how to link your brand, web site and blog into a coherent and effective business plan.
And, finally, you won’t be going anywhere in 2011 and beyond without a sound HR plan. Our workshop includes two sessions on how to recruit and retain top talent.
Throw in a delicious lunch and some great networking opportunities and I believe this is an event you should not miss. I’m looking forward to seeing you there.
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis