State of Transportation - XPO Logistics

I have reported on XPO logistics  (Follow this link on XPO to see all my thoughts) a lot as it fascinates me how a company comes out of nowhere and becomes so large so fast.  It also amazes me just how much money a company can lose and still be wildly successful (think Amazon.com).  But, since I am not a financial person I trust Bradley Jacobs understands these financial rules and is using them to his advantage.

The real reason I listen to their calls every quarter is no CEO I know of is as honest, direct, and has as much just common sense as Brad Jacobs.  I had the pleasure of meeting and talking with him a few weeks ago and for someone who has done as much as he has, he really is a down to earth person who knows this business well (especially for someone who is relatively new to the brokerage business) and, something that is refreshing, he is very upfront and honest.  So, listening to what he has to say about the industry is very interesting.

On this quarter's conference call he said three things which really were insightful on the market and match what I have said relative to telling shippers not to engage in the fear trade.  Here they are (Paraphrase):

1. This is a lousy business environment for brokerage companies due to the fact that shippers do not have much of a problem finding trucks.  The reason for this is the market is balanced at best case (for transportation providers) and may even be edging to the shipper.  The shipper has no problem finding trucks (except for unique and specific lanes). 
2. XPO is able to find trucks and is able to "clear their board" relatively early in the day so it is pretty clear that trucks are available.  
3. This is probably the most important: When he was asked if he is seeing any issues with Hours of Service or other regulatory issues he clearly said no.  In fact, he said that the one thing which he hears most is just the transportation companies complaining about it.  

My mind is not made up on brokerage in general or XPO for the long haul.  I still wonder why good transportation departments need a "middle man" but I know there are reasons - I always think of them as back up capacity - but people do use them for their core transportation.  The dream of the internet was to eliminate the "middle man" yet in this space the middle man seems to be growing.  

Having said all that, I listen to the XPO call every quarter as you can learn a lot about what appears to be a strong emerging company and the industry in a very straightforward manner. 

Will Monday Morning, July 1, be Y2K All Over Again?

The fear mongering that has gone on about the hours of service (HOS) changes taking effect on Monday remind me a lot of the Y2K fear.  For those who were around then remember the TV networks showing every major city in the world as Y2K hit?  The idea was to see if the lights all turned out, the computers shut down and some sort of Mad Max - Beyond The Thunderdome scenario would start?

Well, here we are again.  The transportation industry believes the world is coming to an end when the hours of service are installed on Monday.  And, as in Y2K and in CSA, it will be a big thud as it relates to the scare tactics.  I have heard everything from 10% capacity reductions to almost 0 so even the "experts" appear to be making this up.

And, of course, all estimates assume perfect productivity today, perfect execution today and that there is no way for the transportation companies to improve productivity - through efficiency - to offset any reduction due to HOS.  They essentially assume perfection and tell the shipper to be ready to pay up.

As one example of how ridiculous this argument is, this blog claims it will mean "15 minutes of lost productivity per driver per week" as if this is a catastrophe.  Is our industry really working at such efficiency levels that we cannot possibly overcome a 15 minute loss in productivity?

I have said this before and I will continue to say it - our industry seems to have lost the desire and ability to drive productivity.  Part of this is because we blame all these external issues for our problems. Stop looking at the externalities and start looking for ways to improve.  Once we change our mindset to actually look at what we can do we may be surprised that we can actually make dramatic, 10x level changes in productivity.  

For those who still think this is a train wreck and continue to predict the ruin of civilization as we know it due to hours of service, I offer you a scene from Mad Max: