Take your pick. Whether it's exchange rate issues, fuel price volatility, crumbling infrastructure or a downturn in consumer confidence and purchasing power, these issues have definitely had an impact...
Take your pick. Whether it’s exchange rate issues, fuel price volatility, crumbling infrastructure or a downturn in consumer confidence and purchasing power, these issues have definitely had an impact on the transportation industry and on executives’ business approach. But an overwhelmingly positive attitude still seems to prevail among executives faced with this year’s economic obstacles.
“We’re not going to dwell on the economy. The sun will come up on the other side,” said Doug Duncan, president and CEO of FedEx Freight, speaking at a recent conference.
“The trucking industry is going wherever the supply chain is taking us,” he added, noting that fast cycle logistics is what led to the formation of FedEx Freight in the first place and is the company’s entire focus.
In terms of positives, said Duncan, there is the return, in one incarnation or another, of manufacturing to the US.
“Some of it is to do with high logistics costs but also because of sourcing closer to market.
“Some of the manufacturing jobs will come back to the US, but certainly to North America,” he said.
Another positive is that because of the economic crisis, many companies are taking a closer look at cashflow and improving it.
“I think that companies have been doing a phenomenal job of taking inventory out of the supply chain, and the reason is cash. I think we’ll see a renewed focus on supply chain compression. These kinds of discussions we can’t do on our own as companies,” said Duncan.
From a supply chain management perspective, said Mike Tierney, president of UPS Canada, “It’s definitely best to proceed with caution when cost-cutting. Keep the long-term always in clear focus. Everyone wants to reduce costs and streamline their operations, including within their supply chain,” he says.
The danger, noted Tierney, is that if there’s no wiggle room in your supply chain and one component experiences a disruption, it could have a severe impact on reliability and revenues.
“Our advice to the cost-cutters would be to skim fat strategically. Look at what is really expendable and what is a necessary extra cost that will serve as insurance to keep your supply chain intact and ultimately serve customers better. We have invested $15 billion dollars over the past 15 years in technology. Our Canadian businesses can leverage this investment to streamline their own processes in order to keep costs down,” said Tierney.
Calgary-based Darshan Kailly, president and CEO of CF ‘Managing Movement,’ said that exchange rates, oil prices and home equity losses feature as top concerns.
“The model that works and has worked for us for a few years is to link up with great partners having geographic coverage and reach, a similar service attitude and strategic management philosophy. Collaboration improves results, i. e. talking with people that are not within the organization and that don’t have to toe the line,” said Kailly.
Tools will matter all the more, whether it’s tracking and tracing capabilities, linked IT systems, excellent equipment at your disposal, and the most relevant tool of all: motivated team members.
“Part of our domestic focus is having local market knowledge,” said Kailly, who noted that the US market is not at all similar to Canada’s.
“It is a tougher, different type of marketplace,” he said.
While Kailly’s aim is to focus on domestic strengths, Rick Gaetz’s approach to the US marketplace has been to make controlled infrastructure the prime objective.
The president and CEO of Vitran Corporation said that the company has merged all of its IT and culture in a complete “Vitran branding.” An IT platform integration, begun in 2007, was completed in May, and Gaetz said that things flowed well despite some EDI and billing quality issues.
“We want to be able to sweep up LTL and move it within our own infrastructure,” he said. “We had to make ourselves more user-friendly with customers.”
Most recently, in October, Vitran completed a facilities integration, and elimination of duplicate facilities, which Gaetz said has led to dramatically improved service times.
“Now we have less expensive line-haul with 14% of our miles cut, because of a combination of streamlining plus the effects of the economic environment,” he said.
He noted that it has been difficult to determine real gains because of such continued economic volatility.
“It’s the first time we didn’t have sequential improvement in the US but ero sion on a daily activity basis (looking at a span from) July to October,” said Gaetz, noting that Canadians in general do not understand how bad a state the US economy is in.
“I would urge you all to manage your business as aggressively as you can. It’s going to be the fight of your life over the next year and a half,” he said.
According to Michelle Arseneau, president and CEO of GX Transportation Solutions, there is no doubt that organic growth will be challenging over the next 12-24 months.
“Some of the strategies we’ve implemented include maximizing our sales efforts in conjunction with direct marketing campaigns aimed at qualified prospects via both print and electronic media. We’ve brought our technology to the forefront of our sales efforts, ensuring that clients are aware of our systems and processes in order to provide increased service levels. We’ve also implemented an internal program specific for new clients called ‘The 5 Star Program’ that ensures all bases are covered with respect to familiarizing ourselves with the needs of both shippers and consignees alike. This program removes any assumptions and ensures that the client’s experience with GX is far above standard expectations. Sourcing and securing new business is difficult enough during such turbulent economic times. We need to ensure that there is no margin for error when an opportunity does present itself,” she said. While Arseneau noted that the proper amount of cost reduction is crucial in tough financial times, too much will result in poor performance and a loss of business, and not enough will result in poor financial performance that will cripple the best of companies over time.
Key partnerships with customers, meanwhile, are essential for long-term sustainability.
“Partnering with the right suppliers is equally important, so as to ensure that the level of service your customers expect will be maintained. By combining the commitment of all parties in your planning and budgeting process, you should be able to achieve your cost objectives,” she said.
Getting face-to-face with the customer is a big priority for Rosedale Transport’s president, Rolly Uloth.
“We’ve been in a constant reinventing of the company, and have been responsive to customer needs,” said Uloth.
Uloth said that while the operating environment in 2008 and into 2009 will certainly be challenging for trucking, he saw more challenges during the regulation era, at least in terms of gaining customers.
Uloth stressed that Rosedale uses a totally in-house approach, with a close environment and no divisions between the operations. The US operations are based at one centre as well.
Internally cost-conscious, while Rosedale does not have true profit-sharing, said Uloth, “Everyone shares in our wins and they don’t have to pay when we’re losing. We have a lot of 20-year people who have a work ethic that you don’t find today,” he said.
Uloth has never had to lay off workers at the company and said he will strive to work with employees in terms of accommodating alternate work schedules especially if it will save a job.
With the market changing by the hour, “it’s going to take special management skills to get through,” said Uloth. “We want to be the most important supply chain carrier to the customer base we choose to deal with,” he said.
So is it possible to maintain a long-term focus on a strategic plan while responding to daily volatility?
Certainly it’s a matter of constantly reviewing your financials.
“The economy will eventually improve and demand will once again surge. It’s important for us to have the infrastructure, technology and geographic presence necessary to meet that demand and provide our customers with the quality of service they have come to expect from UPS. As examples, in 2008, we announced the expansion of our main sorting facility in Canada, a new facility in Calgary and a new facility in China,” said Tierney.
“Instinctively, many companies scale back investment during rough times in anticipation of a drop in consumer demand. Yet doing so can often lead to a drop in quality of service. Cutting corners is not the solution to the economic troubles of today. Putting money into research, innovation and product development, while maintaining a consistently high standard with respect to customer service, has allowed us to prosper in the past, and we will continue that tradition throughout the current economic drought,” he said.
“We all have to plan accurately for the future, and that means to plan often, to ‘refresh the forecasts,’ and to operate without a model” said Duncan. “But you do have to have a long-term plan with regard to facilities,” said Kailly.
“If you don’t manage the detail differently on a daily basis while maintaining a long-term plan, you won’t be there to manage it,” said Gaetz.
If there’s pressure by suppliers, he added, “Be prepared to say no. Often ‘no’ will still get you the relationship.”
“I remind my sales force all the time that negotiations don’t begin until the word ‘no’ comes out,” said Duncan.
Features editor Julia Kuzeljevich has been writing about transportation issues for almost a decade. Her meticulously researched articles have garnered transportation writing awards and several Canadian Business Press Award nominations.