Target Freight News

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By Patrick Gorman – March 20, 2018

For Target Freight Management CEO Mike Wagner, connecting with his employees beyond the workplace is important, and outlets such as youth sports are a great way to strengthen those connections. Wagner makes a point to support his employees’ children’s youth sports initiatives, whether that’s through coaching, funding teams or just supporting young athletes.

This year, six children of Target Freight Management employees are moving on to college with athletic scholarships, something Wagner is very proud of.

“It’s just good to see that their kids are pushing forward, trying to do something extra. And having that many in one group, especially in sports, it’s just unique. I know a lot of these kids personally because I’ve seen them play, I’ve coached their brothers and they’re friends with my daughter,” Wagner says.

Chief Executive spoke with Wagner about forging deep relationships with employees, managing growth, and some of the common misconceptions business owners have surrounding transportation and logistics.

Q: Why do you believe it’s so important to connect with your employees outside of the typical work environment?

A: For me, in today’s age, loyalty is a problem at times. I guess I’ve gone against the grain because I hire people that are friends, selectively. I have hired some family selectively as well. Pittsburgh’s not a huge city, but I’m in the neighborhood outside of Pittsburgh. And a lot of people in South Park, for example, where I’d lived for about 10 years, probably 7 or 8 families have lived in South Park. I’ve coached their kids. Their kids are friends with my kids. There are just a lot of interactions in the neighborhood as it is, and I think the difference between me and a lot of other people, as soon as we leave the building, it’s more of a personal relationship. It’s not talking about business and not carrying over your issues you may have in business on a day-to-day basis. The minute we walk out the door, it’s more about our kids and enjoying life and things like that.

“growth is a double-edged sword because you want to grow as fast as possible, but then at the same time, you must be able to handle it from an operations standpoint.”

Q: Tell me a little bit about how you’ve managed that growth in such a rapid period of time. Are there any kind of challenges or ways you’ve kind of handled that…kind of the rapid pace of growth within your organization?

A: In 2012, we were named Pittsburgh’s fastest-growing company and we grew from zero. We started in 2009. I think our base year revenue was like $500,000. And we did $18 million in the third year in growth. That’s 2,300%. You sit there and you grow like that and you’re like, “Wow, everything is just gonna keep on growing. Everything is gonna be great.” And I went flat for almost two years on the freight management side. That’s because we grew so fast, but that our operations was behind. We had our fair share of mistakes. We lost some customers and then you’re focusing on operations and you’re not focusing enough on sales, and we weren’t selling as much.

And part of that was we just weren’t prepared for how much business we were bringing on and that’s…I mean, it’s a great problem to have in some respects, but I was very focused on the customer experience and I don’t want anybody to look at my company in a negative manner because we couldn’t deliver on something that we promised. So we’re very careful before we promise or we guarantee our customers. I want to make sure that we can hit those metrics and not paint a rosy picture that’s not actually realistic.

The growth is a double-edged sword because you want to grow as fast as possible, but then at the same time, you must be able to handle it from an operations standpoint. And I came from a sales background. So selling was always something that kind of came natural to me. So I knew I could bring on clients. What I didn’t know when I started the company was how would I handle the backend.

And I think when you come from a sales background and you’re not on the back-end ops, there’s always some issues between sales and ops on, “Oh, if you’re just bringing on business or all you do is maintain it,” there’s a certain respect I have for the operations side now because it was much harder than I thought it was when I was just a sales rep.

Q: What are some of the common mistakes or misconceptions that you see with your clients and businesses that you work with in terms of transportation and logistics?

A: I think one of the common misconceptions is a lot of companies don’t want to outsource through a 3PL because they like to handle things in-house and they think they can do it better.  And the problem is there’s so many moving parts in shipping and transportation and logistics today that if you’re selling widgets, you should be focused on selling widgets and that’s it. The transportation side is a whole other arena.

And 20, 30 years ago when you shipped something, it had a class associated with it. There was a cost associated with it. It was fairly easy to just ship it. You knew what your cost was. Today, most freight is moving to a density-based platform, kind of like the parcel companies that do a dim weight, meaning the pounds per cubic foot of the actual shipment you’re sending in the LTL world today will now determine your class which determines your cost.

If you shipped desks, for example, 30 years ago and they were just class 70, you knew your cost was fixed, essentially. Well, now, this is a density-based item and what you used to ship in class 70 may be going in class 300. Well, the basis for class and cost is class 100 was a table, class 50 is 50% of 100. Class 300 would be 300% of class 100. So we looked at it from that standpoint, and you think, “Today, well, I used to ship a desk in class 70 and now it’s class 300.” You think, “Wow, my rates are 330%. The problem is now carriers have had the ability to fluctuate those costs and class 300 isn’t necessarily 300% of class 100. It may be 600% of class 100.

So when customers start shipping products, and all of a sudden the NMFTA [National Motor Freight Traffic Association], which changes different products every quarter, makes an announcement that desks, which used to be class 70, are now density-based and now you’ve been shipping desks for 30 years at class 70. Now, they can be anywhere from class 100 to 500 based on the pounds per cubic foot of how you ship it. That is a huge change in how people have done business.

Q: What’s next in the transport and logistics field that you think that business owners might want to keep their eye out for?

A: There was the massive change last month where these ELDs [electronic logging devices] went into place. Every truckload carrier in the past could do paper logs and they could drive 800 miles a day. And as long as they had their logs clean, they were OK. The problem was long-haul truckers, for years, have been falsifying those documents. So, I think, the federal government stepped in and said, “From now on, electronic logs are required.” So now you can’t cheat and you can’t drive extra hours and extra miles because it’s all tracked through an electronic log and you used to be able to drive 800 miles a day and they reduced it to 600 miles a day.

So what it did, there was a huge trickle-down effect. A bunch of carriers didn’t get it done in time so they’re not on the road anymore. So there’s less trucks on the road but the freight is still growing with the way the economy is.

So a lot of that freight got pushed down to LTL [less than load], and the LTL carriers were prepared for it so they figured they’re going to get a bunch of long freight that’s not great and easy to handle. So they started changing all their pricing to reflect what the freight they thought was going to come down for the truckload market that they didn’t want so then basically made it less having pages to ship at LTL, even though that a lot of customers knew there was going to be a truck shortage and costs were going to go up substantially in the truckload market.

For example, I had a customer…I was at a trade show in Vegas in January and the customer said they were shipping flatbeds across the country for about $4,800 and now it’s $6,500, and they are no longer competitive. And it’s a problem because there’s not enough trucks, there’s too much freight, the electronic logs. And the trickle down was you used to be able to get across the country in like 4 days, but now that it’s 200 miles less a day, you’re taking 5 and 6 days to get across the country.

So then that drops down to rail, because rail used to be seven or eight days across the country and truck was four days, so everybody used trucks because rail took too long. But now rail is always seven or eight and the truck is five or six, so for an extra day or two, you might be able to save $2,000 per shipment. All these things have a trickle down on everything. I just think it’s going to continue to tighten up because there’s more and more culpability on driving and electronic logs and things like that. It’s just going to get tighter and tighter. It’s going to get harder for shippers to manage this process on their own and they’re going to need companies like mine even more down the road.

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By Mike Wagner | Thursday, March 15, 2018

When shipping millions of tons of material from coast to coast, contractors can’t afford to get derailed by details. But recent changes to shipping rules and labor availability are creating headaches for suppliers of all sizes — and if they don’t get solved quickly, they could lead to bigger problems down the road.

Here are three tactical shipping challenges that will impact the construction industry in 2018, and possibly well into the future.

Higher Shipping Rates Due to Mandatory ELD Compliance

In 2015, FMCSA established a new electronic logging device (ELD) mandate that clarifies how drivers are required to log and report their hours. The mandate’s goal is to improve road safety and efficiency while minimizing driver exhaustion.

However, to comply with this mandate, many operators must install new ELDs fleet-wide. While these devices can also measure driver data such as speed and braking and provide real-time routing assistance — all of which arguably helps improve driver performance while reducing wear and tear on machine and driver alike — the cost of implementing all these new devices is finally affecting shipping rates.

December 2017 was the ELD mandate’s first compliance deadline, with an expected “hard deadline” of April 1. This means if a truck isn’t equipped to pass the mandate today, it could start to incur fines until it’s proven to be compliant. One exception is that if the fleet already has Automatic Onboard Recording Devices (AOBRD) installed, their use has been grandfathered in under the mandate until December 2019… at which time they’ll need to be replaced with fully-compliant ELDs.

The cost of all of these new digital investments will need to be recouped, which means shippers need to find creative ways to fund their fleet’s ELD mandate compliance without hurting their bottom line.

Driver Shortages Create Demand — and Wage Hikes

Until the robotic or autonomous truck revolution arrives, America still runs on human power.

More than two million truck drivers across the country are responsible for delivering over 70 percent of all goods consumed in the U.S., which could lead a data lover to believe that trucking is a booming career path.

Instead, they might be confused by the reality of the numbers.

Despite ATA job projections that the trucking industry needs to find nearly one million new drivers to meet rising industry demand, there’s still a shortage of qualified applicants that could lead to a shortfall of over 150,000 drivers by 2026.

Whether the absence of new drivers is due to increased interested in other fields or because potential entrants are finally starting to believe all the “AI is about to make drivers obsolete” hype is anyone’s guess. However, the impact of this labor shortage on wages and shipping rates is very real. Some companies are even delaying shipments to avoid paying premium wages, hoping that an influx of new drivers will bring prices down.

In the meantime, experienced drivers often find themselves competing for better wages in a top-heavy market. This creates an expensive vacuum in the middle of the industry and a dangerously narrow pipeline of new talent arriving to fill it.

MABD and OTIF Ripple Effects

Although Walmart and Amazon don’t sell concrete (yet), the choices they make in their perpetual efficiency war often have long-term effects on other industries.

In this case, a tweak to Walmart’s supply chain rules will now penalize its suppliers for delivering early or late, as well as for delivering less than 100 percent of an expected shipment. Starting in February 2018, Walmart’s FTL suppliers must arrive exactly on the Must Arrive-By Date (MABD) 95 percent of the time or face a penalty, while LTL suppliers must arrive on the MABD at least 36 percent of the time, with performance improvements expected over time.
Non-compliance with the 100 percent accuracy rule will result in a fine (or chargeback) of 3 percent of the shipment’s “missing case” value and early shipments will also incur additional penalties.

Walmart is tired of absorbing its suppliers’ time management and supply chain issues, so it’s going to fine them until they get things right — and because shipping logistics can already be a nightmare for some suppliers, Walmart expects to make a lot of profit from levying all these fines.

In fact, Walmart’s new On Time In Full (OTIF) policy is projected to create up to a billion dollars in new revenue via penalties for its suppliers. If this revenue-creation strategy works for the world’s largest retailer, other industries will quickly adopt these rules too.

How Should Smart Companies Prepare to Meet These Challenges?

While all three of these issues have their own causes and effects, there are several choices a company can make today to help defend itself from spiraling costs across the board.

First, evaluate the efficiency of the company’s entire supply chain. Which segments consistently operate without a hitch? Where are the biggest headaches? What can reliable systems teach about the components that obviously need improvement?

Second, invest in the best people. The stars of an organization who maximize their own productivity, develop new initiatives and help keep employees, customers and vendors happy are the best defense against any challenge. Equipment and processes are guaranteed to change over time, but hiring and retaining star employees never goes out of style.

Lastly, ally with experts who can solve problems before they start. Don’t let new changes in technology, logistics or surprises in the labor market break the focus on long-term success. By staying on top of market trends and investing in tomorrow’s solutions today, contractors can avoid the sudden challenges that keep the competition awake at night.

ITEM 500 – Detention of Vehicle with Power

This item applies when Carrier’s vehicles with power units are delayed or detained on the premises of consignor, consignee, or as close thereto as conditions will permit, subject to the following provisions:

1.GENERAL PROVISIONS:

This item applies only to vehicles which have been ordered or used to transport shipments and only when the delay or detention is not attributable to the Carrier.

• Free time and detention charges for each vehicle will be as provided in PART 3 of this item.

• The charges provided in this item will be assessed against the Payor of the freight charges unless payment has been guaranteed to the satisfaction of the Carrier by the consignor, consignee or a third party. When there is more than one Payor, charges will be prorated based on the weight of each individual shipment.

• Nothing in this item shall require Carrier to pickup or deliver freight at hours other than the Carrier’s normal business hours. This shall not be construed to restrict Carrier’s ability to pickup or deliver shipments at times other than its normal business hours.

2. COMPUTATION OF TIME

• The beginning and ending times shall be entered into the Carrier’s hand-held driver log device by the Carrier’s employee and shall be binding on each party.

• Computation of free time will begin when the Carrier’s employee notifies a responsible representative of the consignor or consignee at the premises of pickup or delivery that the vehicle is available for loading or unloading. The time for each vehicle will end when loading or unloading is completed and the consignor or its representative, in the case of loading, furnishes the Carrier’s employee a signed Bill of Lading or other documents necessary for forwarding the shipment, or, in the case of unloading, the consignee or its representative furnishes the Carrier’s employee with a signed Delivery Receipt.

• Computations of time are subject to and are to be made within the normal business hours at the place of pickup or delivery. If the Carrier’s employee is permitted to work beyond this period, such working time shall also be included.

• When loading or unloading is not completed at the end of normal business hours, the consignor or consignee, or its representative, shall have the option to request that the vehicle remain at its premises without power or to request that the vehicle with power be returned to the Carrier’s terminal subject to the following:
  • If the vehicle with power is changed to a vehicle without power before expiration of the free time for a vehicle with power, free time will cease immediately at the time the request is made and detention charges for a vehicle without power will begin immediately with no further free time allowed.
  • If the change to a vehicle without power is requested and made after expiration of free time for a vehicle with power, the vehicle will be subject to accrued charges for detention with power, if any, and charges for detention of a vehicle without power will begin to accrue immediately with no further free time allowed.
  • If the consignor or consignee requests that the vehicle be returned to the Carrier’s terminal, computation of any remaining free time will cease at the time of the request. That portion of the shipment in the Carrier’s possession will be subject to storage charges as provided in Item 910 of this Tariff. When the vehicle is returned to the consignor’s or consignee’s premises, computation of any free time will resume. That portion of a shipment that is redelivered to a consignee will be subject to redelivery charges as provided in Item 830 of this Tariff.

• If the consignee cannot guarantee that physical unloading will commence within 30 minutes of the time that the Carrier’s employee advises the consignee that the shipment(s) is (are) available for delivery, the Carrier may consider the shipment(s) refused through no fault of the Carrier and the shipments will then become subject to redelivery, and, if applicable, storage charges.

3. FREE TIME & DETENTION CHARGES

• When the loading or unloading is delayed beyond the free time shown below, a charge of $45.00 per vehicle for each 15 minutes or fraction thereof shall be made for the time consumed for the delay, subject to a minimum charge of $50.00 per freight bill.

• Free time for loading or unloading shall be determined as follows:

• When multiple shipments are received from one consignor or delivered to one consignee at one time in one vehicle, free time shall be computed on the aggregate weight received or delivered.

Parcel Shippers look at New Ways to Control Dimensional Weight

Small Parcel shippers understand the nature of the General Rate Increase, and they attempt to mitigate the increase accordingly.  We, as shippers, understand the dimensional weight logic changes (default 139 now in case you haven’t checked lately) and, ideally, we were preparing for several months to ensure our invoiced costs and negotiated divisors most accurately reflect our actual shipping profile.  Now that the smoke is clearing we are getting a look at who took a financial hit and what alternatives exist to create savings through durability, not just the divisor.  The logic changed—did shipping patterns change?

Cube Utilization

When considering dimensional impact, and more so how to offset it, we must first understand cube utilization.  We can go fast and furious and attack the dimensional divisor itself, but few shippers get the divisor waived.  Instead of immediately targeting the surcharge, let’s understand what drives it—and how we can eliminate it outside of the contract.

Cube utilization is the use of space within a container or box—a percentage of total usable space.  The average e-commerce shipper achieves 60-65% cube utilization on outbound boxes.  This means that package has 35-40% of its inner space occupied by fillers or air.  Unfortunately you aren’t paying peanuts to ship those foam peanuts. 

We want to consider the concept of unitizing as we utilize.  Unitizing a shipment or load is taking smaller packages (units) and putting them in a larger package or system to move the shipment easier—the goal being to pack the shipment and use the space in the container efficiently with product.  If a product is not designed correctly shippers then need to adjust packaging to offset poor product design. 

Product Durability versus Package Performance

A significant area of review in transportation cost management is packaging optimization.   Shock, vibration, compression—this is what your package is exposed to each time it gets sorted in a hub or station and loaded on the van.  A package traveling a mere couple hundred miles may be loaded and reloaded as frequently as five times between truck, terminal, and hub.  Carriers offer definite delivery times so these packages need to be scanned quickly and moved to the next destination.  Therefore package handlers will sort the packages in a manner the keeps the center of gravity low, so the package is not top heavy and risks falling off the belt, and keeps the label visible at all times. 

Package handlers do not stack one package on top of the next in a column but rather the packages are interlocked.  The goal is to securely move as many packages as quickly as possible.  The concern is compression.  Corrugated box strength, when interlocked in transit instead of column stacked, is reduced by up to 50 percent.  Handlers try to keep the heavier packages on the bottom of the stack, but since packages are stacked and loaded as they are received, smaller less dense packages are subject to supporting the weight of the package wall.

Compression is not exclusive to stacking.  When a sortation belt jams packages can slam into each other and continue to press together until the jam is alleviated or the belt is turned off.  Compressive forces can impact the top and bottom as well as the sides of the package.  Palletized packages are frequent victims of dynamic compression, which is why shippers are encouraged to consult their carrier’s package testing lab to verify the durability and sustainability of the package composition before using it to send merchandise.  As shippers we want to cut dimensional cost by under designing the package.  This makes sense for cost containment—less wasted package space, less billed weight.  But if your product lacks durability, what you save in packaging you spend in replacement freight, fees, and fuel.

If you are at 50 percent of your strength you are also at 50 percent of your support, which now introduces the elements of shock and vibration.  Shock occurs when a package is dropped or rattled by another package.  Packages rarely fall flat; they normally strike an edge or corner or hit the bottom surface of the package when they land.  This impact can cause abrasions to the package surface or tear the packaging entirely, subjecting the contents to damage.  To ensure some level of protection, a two inch buffer should be allowed on each side between the product and the packaging.  Anything greater than two inches introduces package over design. 

As trucks, aircraft, and sortation belts move they create levels of vibration.  Vibration varies from a steady constant hum to several pinpointed sharp jolts.  Packages on a trailer driving cross country are subject to vibration for days.  This constant movement can loosen closures and weaken packaging and shift the package contents, resulting in pressure points on the box, bag, or container.

Two additional packaging hazards to consider are climate and altitude.  Contractor vans are not air conditioned so if it is 100 degrees outside the van it is 100 degrees inside the van.  Likewise if the van is traveling through below zero temperatures the packages are below freezing as well.  Most cargo jets are pressurized, but trucks can hit altitudes over 10,000 feet. 

The challenge for many shippers is knowing what dimensions exist in their warehouses, and what the actual weights of those packages are.  We receive manifests of tracking numbers and associated dimensions, but without knowing actual weight, we will be challenged to adequately quantify the potential cost increase.  Many warehouses do not own or lack the manpower to employ software to capture and store the data.  How are shippers handling the new logic?  They are looking to cubing and weighing systems.

Automated dimensioning systems optimize freight handling by quickly and accurately obtaining package dimensions, storing the shipment data, and allowing shippers to rapidly sort and target problem packages.  We see static systems—collecting data on stationary items and sending the metrics to the warehouse for freight manifesting.  Since packages move so we need a way to review data when the boxes travel on conveyor belts.  As we discussed above, packages fall, stack, and smash so the shape of the package at pick up can drastically change during sortation and delivery.  If the shape changes, the dimensions can change, and now your billed weight can change even if the package just went a mile down the road.  By using in-motion scanning systems shippers can review length, width, and height. 

Key Takeaway

Shippers are feeling the dimensional logic pinch, just as we knew they would.  Be mindful that the carriers changed the operational cost of doing business, not just the financial cost.  When a carrier looks at your actual package differently we need to look at the impact of poor design.  We can negotiate a solid dimensional divisor, but if package performance is weakened, so are our expected savings.

Brittany Beecroft is our Director of Parcel at Target Freight Management.  She can be reached at 304.374.4739 or via bbeecroft@targetfmi.com.

Target Freight Management’s Truckload division has been named #71 on the Inc. 500 list!  We are happy to see our fast-growing division continue to rise on this national list.  Last year, Truckload was #82 and the division jumped 11 spots this year.  Mike Mitruski, Director of Truckload, says the growth is attributable to the fact that, “we’re big enough to get national competitive pricing but small enough to tailor our services to each companies’ specific needs.  No company is too big or too small to get the same attention from us.”

We know there are more great things to come from Truckload as the division continues to grow.

TFM and TFM Truckload have both made the 2016 Fastest Growing Companies List, recently announced by the Pittsburgh Business Times.  On August 18, we’ll find out the exact placement on the list for both divisions at the reception that evening.

In 2012, TFM took the #1 position as the fastest growing company in the region and has remained on this list every year since.  Our goals were planned and deliberate and this honor is as exciting as it is every year.

This is a first-time honor for our young TFM Truckload division. This group has been aggressive with new client acquisition since we started and it is paying off.

We’ll keep you posted on where we land on the list.  TFM and TFM Truckload will be represented at the reception.  We’re looking forward to another wonderful evening in the company of these successful, growing businesses.