Estes is Fined by EPA for Air Violations - Another Volkswagen?

I just saw an interesting news article stating the EPA has fined Estes $100K (Plus Estes has to pay another $285K in projects) because they violated the California Truck and Bus Regulations.  From the news article:

"EPA Regional Administrator Jared Blumenfeld said Estes violated the California Truck and Bus Regulation dozens of times between 2012 and 2014.

The regulation, adopted in 2009, requires that all commercial heavy diesel trucks and buses operating in the state be equipped with diesel particulate filters (DPFs), which limit toxic emissions."

In light of the Volkswagen issues where the car company clearly violated environmental laws on purpose, I think we are going to see a lot more of this.  As we all know, with regulations companies take "calculated risks" and one of them appears to be around meeting environmental regulations.  My advice to compliance departments is they may want to tighten up what they are doing.

There were also two very important items embedded in the article and the first one has to do with sub-contractors to Estes:

"In reaching the settlement, Estes cooperated with federal investigators, admitting that the company or its subcontractors in California operated more than 80 trucks between 2012 and 2014 that were not equipped with diesel particulate filters"

What is fascinating in that statement is they are taking direct responsibility for their sub contractors. So, one way "around" the laws is not to just broker freight and say it is their fault.  Looks like Estes will own that liability too.

Finally, the article states:

"Sax said this was “the first of many cases” the EPA and CARB will bring against trucking companies in order to enforce the California Truck and Bus Regulation.

Blumenfeld confirmed the EPA has been investigating out-of-state trucking companies operating in California since the spring of 2014."

If that is not a direct statement of intent, I do not know what is.  Clearly, companies had better be careful with what they are doing in California and I would suspect you will see a lot of new trucks headed West soon.

I think the regulators are getting emboldened as they are finding more and more of this abuse. There also was a case against Samsung where they had defeated the Energy Star ratings in refrigerators and in that case had to compensate every consumer. We all know of the troubles International / Navistar has had.

If I were at a trucking company I would be less concerned about "more regulation" and far more concerned about whether my company was meeting requirements in the first place.  

Companies Mentioned in This Article:

1. Estes Express Lines
2. Volkswagen
3. Samsung
4. CARB - California Air Resources Board
5. EPA - Environmental Protection Agency

Omni Channel and The Ever Persistent Discussion of Final Mile

Over at Logistics Viewpoints (A blog you should be reading) Chris Cunnane gave us a sneak peek into a survey he conducted with DC Velocity magazine about different final mile modes and their current and anticipated adoption rates.  The results were not overly surprising.

However, the one that really stuck out at me was the feedback on the use of crowdsourcing  options. It would seem to me that forward looking executives, especially in the light of Amazon's Prime Flex announcement, would be more interested in this option.  Only 27.7% have said they include this option in their future plans.  

I then go back to think about the talk Dave Clark, SVP of Worldwide Operations and Customer Service at Amazon, gave at the recent CSCMP Annual Global Conference (AGC).  One of the most intriguing parts of his discussion was the idea of innovation and the categories of "one way" and "two way" doors.  Let me digress and describe this for you:

When innovating, ideas can be categorized into "one way" and "two way" doors depending on your ability to back out or recover from the idea.  The brief definition:

• One Way Door:  This is when the idea, once launched, either cannot be taken out or would be too costly to change back.  This type of innovation requires a lot of deep thought, analysis and modeling because once you go in, you are all the way in (See my posting on Cortes' boats).
  
• Two Way Door:  This type of innovation is one that you can experiment, pilot and then recover or back out if it does not work.  Thing Google Labs on this one.  How many things has Google launched, decided it does not work and just stop.  No harm, no foul.
  
  A two way door innovation is one you should develop quickly and try it out.  Worst case you will learn something and best case is it will work.  If it does work, because you moved so quickly, you will have incredible first mover advantage - something that is vitally important in the world of fast follower copy cats.  

It strikes me that crowdsourced final mile delivery is something that falls into the Two Way Door category.  It will cost some R&D dollars to develop but that is about it.  You can launch, manage, learn, adapt then either pull the plug or make it part of your core processes. 

Which is why I am so amazed only 27.7% said they are even thinking about it. 

But then again,  I once heard a trucking executive in the 90's say, "We will never do business with the railroad".  Some companies innovate and some whither.  Those are the only two choices.  Not innovating is not an option.  

Fuel Prices Go Down... UPS and FEDEX Raise Fuel Surcharges

If there ever was proof that the entire industry's structure of fuel surcharges is just a bunch of smoke and mirrors, this event proves it.  Recently, both FEDEX and UPS announced they are raising the fuel surcharges even though their fuel costs are down by over 30%.  They offer this absolutely absurd argument that it is this way because of the increase of heavier packages going to more retail locations.  Both they claim increase fuel consumption.

Of course, they do not give you a reduction when the new engines provide better fuel consumption or they use CNG vehicles or any of the other many things that reduce fuel costs.

The bottom line is that the shipper should know that even in the truckload and intermodal space industry fuel surcharges in no way have anything to do with fuel.  They are built on false indices, with bad data and the shipper has just had to accept it (unless you use Breakthrough Fuel in which case you are one of the leading shippers who are really taking ownership of your fuel costs).

The argument that FEDEX uses is really laughable.  Watch out as these companies are going to continue to add charges, adjust tables and overall just obfuscate what you pay in packages to justify what appears to be a pretty bloated cost structure.

We will keep an eye on this and report as it continues to develop.

Full Disclosure:  I was an employee and customer of Breakthrough Fuel.  I bring them up because still to this day they are the only company (literally the only one) that appropriately deals with these ridiculous charges.

Where Will The September Index Land?

Just posting the August numbers as a reminder since we should have September shortly.  However all indications are freight was soft as well as the economy in general.  August showed a month over month decline in shipments of 1.2% and a decline in expenditures of 2%.  The Year over Year (YoY) was even more pronounced with shipments decreasing 4.6% and expenditures down 8%.

Even with the rebound in stocks recently, the Dow transports are down 9.7% this year and the total market only down 2.36%.  Bottom line, the freight transportation volumes continue to be softer than predicted and I am not sure there is any "push" for the retail season.

Looking forward to the September numbers and here is hoping I am wrong.

Total Quality Logistics Opening in Daytona Florida

This is good news for Florida. TQL to open an office in Daytona and bringing over 100 jobs.  If you look at the map, the area from Jacksonville to Daytona than over to Orlando is truly becoming a logistics hub.  Not sure it is a "cluster" yet but really close. 

Great trained workforce, access to good training (University of Northern Florida is truly an unsung gem), low cost, no income taxes and access to the beach - what else would a company want!

Heading to the USS Midway...

I am heading over to the USS Midway and just in awe at the sheer volume of logistics support needed to support such a huge floating city.  See my tweets at https://twitter.com/Logisticsexpert and learn about this incredible engineering feat!

What Exactly is Amazon... 3PL? Retailer? IT Company? Delivery Company? - Answer: All of the Above

I have written about the growth of Amazon as a 3PL / Logistics company for a long time and yet even I, after following them very closely, did not fully understand their reach into all facets of the value chain until this week.  This week I had the privileged of attending the Council of Supply Chain Management Professionals' (CSCMP) Annual Global Conference where I heard Dave Clark, SVP of Global Operations and Customer Service at Amazon speak about their plans.

Amazon Prime, Amazon Flex etc etc. were all discussed at this conference and I found it fascinating. A couple of key points:

1. They take care of back office technology to support the front end.  Too many times companies will roll out slick apps or websites but do nothing different in the back room.  This leads to sexy presentations but bad customer experiences.
   
2. Innovation is a way of life at Amazon.  Amazing amount of innovation and amazing how much of it bubbles up from the working level.  This, of course, does not happen by accident and the culture along with the infrastructure to support this environment has been nurtured over a long period of time.
   
3. The concept of one way and two way doors in innovation was critical.  A two way door is where an innovation can easily be backed out of if it does not work. In this case, the innovation is moved along quickly, tried and adjusted if needed.
   
   The one way door is an innovation where the ability to come back is severely limited (Think Hernan Cortes burning of the boats).  This means there must be very careful thought, due diligence and research before going forward. 

   

   Hernan Cortes burns the boats

   This structure allows for a lot faster innovation on a lot more products and services?  He did not say this but I would think for every 1 "one way door" innovation there are at least 10 "two way door" innovations.  Why make those 10 go through the grind necessary for the one way door innovation?
   
4. Speed is clearly their goal.  They measure order to delivery time from the time the customer hits "buy" to the time the product is out the door.
   
5. When asked how they balance service and cost his answer was clear:  They don't.  They provide the service then figure out the cost.  When asked about profitability he responds that Amazon is very profitable... they just choose to reinvest all the money back into the company. 

If you are in any of the industries I mentioned above, don't think Amazon is not coming for your business ... they are.  

See all my writings on Amazon here.