Best Practices for Acquiring Transportation Services

Surviving Capacity “Crunches” & The Impact of CSA 2010

GSA’s 2011 Transportation ForumWashington, DC, April 20, 2011

Jeffrey TuckerCEO, Tucker Company Worldwide, Inc.CEO, QualifiedCarriers.com Board Member & Treasurer, Transportation Intermediaries AssociationBoard Member, National Industrial Transportation League

Shrunken and weakened marketplace meets surging economy and freight volumes Fuel costs escalating Rapid-fire new regulations

Hours of Service (HOS) EOBRs Possible legislation Panic over CSA (formerly CSA 2010)

Many “Moving Parts”

Great Recession Trucking industry shrank over 15% Equipment purchasing nearly haltedRecovery 210% increase in Feb Class 8 truck sales –FTR Associates & ACT

Research 84% of carriers expect higher contract rates this year –UBS Investment 55% increase in “spot market” volume 4Q2010 –TransCore 8% growth in Jan. truck tonnage – American Trucking Associations 11.4% increase in Feb number of shipments YOY—Cass Freight Index 35% increase in Feb total freight expenditures YOY –Cass Freight Index

Freight Indices Improved

U.S. Freight Expenditures YOY

Expenditure growth rate nearly triple that of monthly growth.

DOE Nat Avg. Retail Diesel: 4/18/2011 $4.105 Prior Year $3.015 vs. 4/18/2010 $1.031 Increase 33.5%

Factors at play: Middle East & North Africa events US cold winter Significant increase in freight moving (LA/Long Beach activity

increased 25% in 2010 vs. 2009, a record YOY increase) US EIA expected record $85.17 per bl. in 2011 ($101.13 on 3/11) Transport industry increases use/demand

Fuel Costs

FMCSA (USDOT) launched first phase12/12/10 Replaced SafeStat (SEA Scores) Enormous new emphasis on driver behavior

Bad drivers fired, driver pool reduced, safer drivers sought ($$$) 2 driver scores (unsafe driving & fatigued driving) were correlated to crash

risk in first study Behavior of some shippers and brokers: overreaction

Some rewriting contracts to eliminate carriers with a BASIC Alert before they understand the program, or the consequences

Shippers are afraid of costly litigation (negligent hiring & vicarious liability for carriers’ accidents

CSA (formerly CSA 2010)

What are CSA BASICs?

SMS 6 BASICs + Crash Indicator

Examples of violations include:

Unsafe Driving Speeding, reckless driving, improper lane change, and inattention

Fatigued Driving HOS, ill, fatigued, logbook errorsDriver Fitness Invalid/no CDL; endorsements, medical

cert.Controlled Substances & Alcohol

Use/possession alcohol, illegal drugs, misuse of Rx

Vehicle Maintenance Brakes, lights, mechanical defects, failure to repair

* Improper Loading/Cargo Securement

Shifting Loads, spilled or dropped cargo, unsafe HM

* Crash Indicator Histories/patterns of high crash involvement

* Not available to the pubic to view

Total “For Hire” Motor Carriers: 155,240Of Carriers with at least 1 BASIC score reported:

Carriers with at least 1 score: 54,813 (35% of Total)

Carriers w/ 1 BASIC Alert: 21,640 (40%) Carriers w/ 2 BASIC Alerts: 7,594 (14%)

Carriers w/ Unsafe Driving Alert: 8,448 (15%) Carriers w/ Fatigued Driving Alert: 21,837 (40%)

Sources: USDOT & QualifiedCarriers.com, through April 7, 2011

Current State of U.S. Truck Safety Data

* FMCSA Safety Rating alone determines a motor carrier’s fitness for use, and should always take precedence over, and clearly outweigh, any single score, or collection of scores, or data set, including CSA’s SMS or BASIC scores.

* Some courts may differ, so why has TIA arrived at this determination?

Collectively, all of FMCSA’s data, and all of its law enforcement designed data and processes, its carefully designed, internal, non-public processes applied to all of its data, still do not arrive at a Safety Rating for a motor carrier.

* FMCSA new guidance (March 2010):

“Unless a motor carrier in the SMS has received an UNSATISFACTORY safety rating pursuant to 49 CFR Part 385, or has otherwise been ordered to discontinue operations by the FMCSA, it is authorized to operate on the nation’s roadways.”

TIA Formal Position on FMCSA Safety Data

Expect and build increases to your freight budgets 5-15% each of the next two to three years (*)

Introduce and encourage flexibility in your operations and freight expectations

Build your transportation resources carefully. Quality of relationships matters most.

Rely on existing partnerships that work. Encourage your Agency leadership to contact

FMCSA.

(*) Sources: Baird, FTR, BB&T

“Crunch” Survival 2011-2012

Be attractive to carriers and service providers Carriers are firing shippers Use drop trailers if volume can sustain it Shorten or eliminate driver waiting time (keep drivers

happy) Add lead time to orders. Pre-book as often as possible

& beat the competition to the truck. Prohibit your carriers from using other carriers

on your freight. This is double-brokering. It’s illegal, voids most cargo insurance & eliminates SOP & security training.

“Crunch” Survival 2011-2012

Introduce new service providers now If you wait, it will be too late Relationships must be built before capacity becomes precious Brokers & 3PLs with strong procedures can become your most

precious resource Consider CSA BASIC scores as a good service indicator

Tends to find better performers Provides limited quantifiable evidence regarding the carrier’s

operation Spend on-going resources to train service providers on

your needs, SOPs, Security. Then go audit them.

“Crunch” Survival 2011-2012

Jeffrey Tuckerjefft@TuckerCo.com www.TuckerCo.com

www.QualifiedCarriers.comwww.tianet.org

856-317-9600, ext. 122

Thank you