Defense Transportation Journal

On the Road with NDTA

June 2013

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Trucking Industry Update DTCI: Leading the DOD Transportation Evolution The Case for Containers

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June 2013

FEATURES Trucking Industry Update June 2013 • Vol 69, No. 3

Publisher

LTG Ken Wykle, USA (Ret.) Editor

Dr. Kent N. Gourdin Managing Editor

Sharon Lo | sharon@ndtahq.com Circulation Manager

Leah Ashe | leah@ndtahq.com

By John Collins

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DTCI: Leading the DOD Transportation Evolution

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The Case for Containers:

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By Tye Beasley

Portable Moving and Storage Containers Can Save the DOD’s Personal Property Program Millions

By Ben Cross

Publishing Office

NDTA 50 South Pickett Street, Suite 220 Alexandria, VA 22304-7296 703-751-5011 • F 703-823-8761 Graphic Design & Production ManAger

Debbie Bretches

Advertising Account Manager

Jim Lindsey

Advertising & Production Carden Jennings Publishing Co., Ltd. Custom Publishing Division 375 Greenbrier Drive, Suite 100 Charlottesville, VA 22901 434-817-2000, x261 • F 434-817-2020

departments A-35 News | Lori Leffler . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Defense Transportation Journal (ISSN 0011-7625) is published bimonthly by the National Defense Transportation Association (NDTA), a non-profit research and educational organization; 50 South Pickett Street, Suite 220, Alexandria, VA 22304-7296, 703-751-5011. Copyright by NDTA. Periodicals postage paid at Alexandria, Virginia, and at additional mailing offices.

Subscription Rates: One year (six issues) $35. Two years, $55. Three years, $70. To foreign post offices, $45.

Single copies, $6 plus postage. The DTJ is free to members. For details on membership, visit www.ndtahq.com.

Postmaster: Send address changes to: Defense Transportation Journal 50 South Pickett Street, Suite 220 Alexandria, VA 22304-7296

Editorial | Dr. Kent N. Gourdin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 President’s Corner | LTG Ken Wykle, USA (Ret.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Chapter spotlight | Jeff Campbell. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 professional development | Irvin Varkonyi. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 chairman’s circle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 honor roll. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Bookshelf Ideas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 index of advertisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

A-35

NDTA Headquarters Staff LTG Kenneth Wykle, USA (Ret.) President

Did You Know that NDTA has a Foundation?

COL Mark Victorson, USA (Ret.) VP Membership Patty Casidy VP Finance

Lori Leffler, CTC, A-35 Chair

Lee Matthews VP Marketing and Corporate Development Leah Ashe Manager, Database Sharon Lo Director of Public Relations Rebecca Jones Executive Assistant to the President Carl Wlotzko Coordinator, Banquet & Special Events For a listing of current Committee Chair-persons, Government Liaisons, and Chapter & Regional Presidents, please visit our Association website at www.ndtahq.com.

Editorial Objectives The editorial objectives of the Defense Transportation Journal are to advance knowledge and science in defense logistics and transportation and the partnership between the commercial transportation industry and the government transporter. DTJ stimulates thought and effort in the areas of defense transportation, logistics, and distribution by providing readers with: • News and information about defense logistics and transportation issues • New theories or techniques • Information on research programs • Creative views and syntheses of new concepts • Articles in subject areas that have significant current impact on thought and practice in defense logistics and transportation • Reports on NDTA Chapters Editorial Policy The Defense Transportation Journal is designed as a forum for current research, opinion, and identification of trends in defense transportation and logistics. The opinions expressed are those of the authors and not necessarily of the Editors, the Editorial Review Board, or NDTA. Editorial Content For a Media Kit and Archives, visit www.ndtahq.com/education_dtj.htm Dr. Kent N. Gourdin, Editor, DTJ Director of the Global Logistics & Transportation Program, College of Charleston, Charleston, SC 843-953-5327 • F 843-953-5697 gourdink@email.cofc.edu

Defense Transportation Journal

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DTA’s Foundation carries out the association’s objective to support, conduct and assist programs of logistics and transportation education, scientific research and development. These activities are carried out in coordination with private, industrial, educational and government agencies. They are designed to increase the effectiveness and efficiency of our distribution industry, and enable it to meet national security needs.

The Foundation supports the NDTA scholarship program by granting scholarships for college and graduating high school students majoring in supply chain management, transportation, logistics, information technology and related fields.

The Foundation is funded by voluntary contributions and donations, as are the NDTA A-35 program activities. The A-35 program also supports the scholarship fund by holding fundraising activities such as 5Ks, Silent Auctions and the Forum Duck Race. When it comes to raising scholarship funds, the foundation and A-35 committees work together in support of our younger members—our future logistics and transportation leaders.

NDTA awards scholarships to members and dependents in three categories: • “ACADEMIC SCHOLARSHIP PROGRAM A” provides tuition assistance to college students enrolled in undergraduate degree programs in logistics, transportation, supply chain, physical distribution or passenger travel services, or some combination of these fields of study.

• “ACADEMIC SCHOLARSHIP PROGRAM B” provides tuition assistance to college freshmen and graduating high school students planning to attend college. Students should plan to pursue studies in business/management, logistics, transportation, supply chain, physical distribution or passenger travel services.

• “ACADEMIC SCHOLARSHIP PROGRAM C” provides assistance for distance learning college students studying the fields of logistics, transportation, supply chain, physical distribution, and passenger travel services.

As you consider supporting the NDTA Foundation and the A-35 program, keep in mind that many current members and their families have benefited from scholarships and activities offered. Today’s scholarship recipients and A-35 members are the NDTA leaders of tomorrow. DTJ For information about the NDTA Foundation and how to donate, please contact Larry Larkin at lil.gener@gmail.com.

For more information about NDTA Scholarships and to apply, please contact Mark Victorson at mark@ndtahq.com.

For further information about the NDTA A-35 program and to become an active member, please contact Lori Leffler at lleffler@hertz.com.

THE FOUR PILLARS OF THE A-35 PROGRAM • Professional Opportunities for Leadership Development & Recognition

Sharon Lo, Managing Editor, DTJ NDTA 50 South Pickett Street, Suite 220 Alexandria, VA 22304-7296 703-751-5011 • F 703-823-8761 sharon@ndtahq.com

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Global Government Strategic Manager, The Hertz Corporation

• Mentorship and Coaching Programs • Networking with Leaders in Government, Military and Industry • Selfless Service to our Nation & Local Communities

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Launching the Next Generation of Logistics Professionals

EDITORIAL

Dr. Kent N. Gourdin, Editor, DTJ Director, Global Logistics and Transportation Program College of Charleston

S

pring is a wonderful time to be the Director of the Global Logistics and Transportation Program at the College of Charleston. As graduation approaches and my students at last realize that the real world is beckoning, their job searches finally kick into high gear. Those that are serious have been able to land terrific positions: one at Norfolk Southern in Roanoke, VA; another at Michelin USA in Greenville, SC; and a third at Sonepar (a leading global supplier of electrical products) in San Diego, CA, just to name a few. With starting salaries right around $60K, I think they are off to a great start.

Clearly, the corporate interest in hiring students knowledgeable in transportation, logistics, and/or supply management is growing. For me, spring also means signing up students who want to enter our Global Logistics and Transportation Program in the fall. I have probably received double the number of applications I had at this time last year, and I have been struck by the students’ interest in, and enthusiasm for the field. Of course, I could be naïve; maybe the word has gotten out about our annual senior trip to Rotterdam, the cost of which is mostly paid by the program. While that trip is a wonderful part of what we offer, I think the students realize that, unlike many other areas they could be studying, this field offers the opportunity to find a job in what is arguably the most global industry one can imagine. Though some of my liberal arts colleagues would probably disagree with me, I believe that preparing our students for the best possible career they can find is what we should be doing. Indeed, most of the students realize this fact as well, so I frequently have students doing the global logistics minor while majoring in communications, a foreign language, political science, or even biology. Given the worldwide scope of logistics, our program provides a great way to put a business spin

on a non-business major, although I never really figured out what the biology major was thinking, as I think he ultimately went into nursing. But, I love to spread the gospel of logistics, so all are welcome!

In March, we held a statewide supply chain meeting here at the College where we brought together the four major state institutions of higher education offering various logistics programs, (College of Charleston, Clemson University, University of South Carolina [the other USC] and Francis Marion University), along with the technical colleges, to discuss with the major business players in the state, (Boeing, BMW, Michelin, etc.) how to best meet the needs of the latter, with the programs of the former. One of the conclusions reached, was that the need for employees qualified to work in logistics far outpaces the supply. And we’re not just talking about those holding undergraduate or masters degrees. Everyone is familiar with the shortage of truck drivers that already exists, a situation that will only worsen as retirements increase. Indeed, a lack of suitable labor plagues not only trucking, but other modes of transportation, as well as warehousing and information technology. Producing such non-degreed labor qualified to fill jobs in

all of these areas is what our technical colleges do best. Again, I find it very gratifying when my students land good jobs; I know my counterparts at the other South Carolina institutions do as well.

I mentioned the trip to Rotterdam that has been an integral part of our program since its founding 25 years ago. My goal is always to return with the same students that I take over, and I am happy to report that my 14th trip went off without a hitch. As you may know, the Port of Rotterdam is expanding out into the North Sea, reclaiming 2,500 acres of land from the ocean. They started creating new land in 2008 and expect to be operational at the end of 2013. To watch the progress from year-to-year as I’ve been able to do on our annual visit, has been incredible.

I find it incredible that the Dutch could go from open water to a mega-operating port in five years. The Port of Charleston has been trying to expand for more than 10 years, and still has several years to go before the new three-berth terminal opens in North Charleston. To witness that kind of growth, is to reaffirm the opportunities that are, and will be, available to students with the knowledge and skills to succeed in the world of global logistics. I am thrilled to be a part of that process. DTJ

Coming soon...

NDTA-USTRANSCOM FALL MEETING 2013 Keep checking your inbox and the NDTA website for details as they become available!

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PRESIDENT’S CORNER FY 2014 and Surface Transportation LTG Ken Wykle, USA (Ret.) NDTA President

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y February column emphasized the uncertainty existing as we entered 2013. During the last five months actions have been taken to lessen the uncertainty for the remainder of government FY 2013. Taxes have increased for everyone (the 2% pay roll tax reinstituted); taxes have increased on businesses for the Affordable Care Act (Obama Care); and income taxes have increased for “high earners.” Sequestration began on March 1st. Congress avoided a government shut-down by appropriating funds for the remainder of the year, and providing minimum reprograming relief to the Department of Defense (DOD).

Sequestration will result in an approximately $42.7B cut for defense. Almost one half, $20.3B, will come from the Operations and Maintenance (O&M) account; $8.1B from procurement; $5.2B from R&D; and the remainder from other accounts. While the O&M account provides the most flexibility for the DOD to cut, combat readiness can be directly affected. The O&M account includes land forces; ship operations; air operations; depot maintenance; base operations support; facilities sustainment, repair and modernization; training and education; transportation; contract services; and others. The impact of sequestration is being felt across the entire enterprise.

This summer the debt ceiling must be raised and the budget for 2014 approved.

These will be difficult and continuous issues. Until these issues are resolved the outlook for government FY 2014 will remain somewhat uncertain.

Longer term, subject to world events, Defense Department budgets are expected to remain flat or decrease over the next decade. Historically US Defense spending has dropped on average by about 36% over the seven years following the wartime peak.

If the US Defense budget follows this pat-

tern, funding would bottom out at $474B in 2015—seven years after its $738B wartime peak. However, the defense caps for 2014 are not that low. They range from a high of $552B to a low of $490B. Areas expected to absorb most of the budget reductions include: 1. Army and Marine ground forces 2. Navy surface fleet 3. Air Force procurement—the F-35 4. Nuclear arsenal 5. Missile defense Areas continuing to receive support include: 1. Special operations 2. Unmanned vehicles 3. Cybersecurity 4. Space 5. Submarines The bottom line is all of this doesn’t change two realities: first, personnel and O&M costs are rising, which is increasing pressures on acquisition accounts; and second, the US will remain the largest defense market in the world.

This issue of the DTJ focuses on surface transportation. If the shrinking budgets were not enough, the motor carriers are being squeezed by regulatory requirements: 1. Hours of Service (HOS) Regulation – The restart and mandatory rest provisions for drivers will be implemented in July. Industry analysts predict a 3-5 percent reduction in driver productivity which will, in turn, increase transportation costs to shippers.

2. Electronic Logging Devices (ELDs) – Once fully implemented ELDs will promote improved safety, enable management to better manage driver schedules, and give law enforcement a more effective tool to ensure compli-

ance with the HOS regulations.

3. Clean Burning Engines – All new tractors contain technologies to reduce emissions and improve the environment. This technology also adds considerable costs to the purchase price of each new tractor, and lowers the tradein value of older tractors, thereby increasing the costs of recapitalization.

4. Service Contract Act (SCA) Requirements – DOD is transitioning from tenders to FAR-based contracts for the procurement of transportation services. FAR-based contracts have a provision requiring compliance with SCA. This provision will require motor carriers to implement complex internal pay review systems to ensure drivers who are paid by the mile meet minimum SCA pay requirements, established by Department of Labor (DOL) and calculated by-the-hour.

SCA complexity and other onerous compliance requirements could also create unintended consequences for DOD—longer delivery times and reduced capacity, which may over time, increase safety risks and adversely impact readiness. Drivers will still be paid by the mile, but carriers MUST ensure they meet minimum DOL wage and hour (plus fringe benefits) standards, and be able to prove, in the event of an audit, that they meet the DOL criteria. This will require conscientious carriers to establish a parallel pay monitoring system to ensure compliance, since DOL’s position will be “the carrier is responsible for proving they are in compliance” in the event a disgruntled driver lodges a complaint, whether the complaint is valid or not.

5. Driver Shortages – The “graying” of the driver pool (now 55 years and rising), changes in HOS regulation, the use of ELDs, and compliance with SCA will all contribute to a shortage of drivers.

The driver shortages will put pressure on motor carriers to increase wages in order to retain and recruit drivers.

6. Capacity Shortages – The additional regulatory requirements, driver shortcontinued on page 28

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TRUCKING INDUSTRY UPDATE

By John Collins, Executive Vice President of Specialized Freight Services, Landstar Transportation Logistics Chairman, NDTA Surface Transportation Committee

I’d like to thank LTG (Ret.) Wykle and Ray Ebeling for the opportunity to Chair the NDTA Surface Committee. It is an honor to represent the surface industry in an environment that provides a channel for communication of ideas, issues, and provides a link between government and industry. I would also like to thank Joe Donald for his outstanding service as past chairman of the Surface Committee. His leadership and dedication during very turbulent economic times and an ever-changing government environment is appreciated.

National Economy

It has often been said that the trucking industry is the “miner’s canary” for the nation’s economy. I recently heard a speaker put it another way: “The over-the-road trucker can tell you the date and time the recession started.”

The national economy was dealt a severe blow in the 4th quarter of 2009. The impact on the nation’s trucking industry was devastating, with thousands of truck companies ceasing operation and tens of thousands of truckers leaving the industry as a result. Now, three and a half years later, the economy is in the midst of a modest economic recovery and, true to form, the nation’s trucking industry is recovering as well, albeit slowly.

Some economists predict slow growth for the first two quarters of 2013, with improvement in the 3rd and 4th quarters. A major potential impact to this theory, however, and unknown at this time, is the impact of government sequestration and the resultant impact on the national economy.

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Similarly, a history of the nation’s recent economic difficulties is illustrated historically by the Industrial Production (IP) Index (Figure 1). These records show the dramatic impact of the recession’s beginning in late 2009, followed by a period of episodic growth, setting the stage for the modest improvement we are seeing today. Many of the nation’s companies rely on the IP Index for strategic planning purposes. So far in 2013, the manufacturing sector’s performance has been extremely slow, in fact, manufacturing output declined in March of this year. There is encouraging news though—unemployment is trending down, new housing stats are up, and domestic oil and gas industries are expanding.

Commercial Trucking Industry

As stated earlier, the commercial trucking industry is recovering on a parallel path to the nation’s economic recovery. With that said, however, there are several issues facing commercial truck companies in general, and DOD-ap-

Figure 1.

Figure 2.

proved motor carriers in particular.

Among these issues are driver retention/ shortages, increased regulation and equipment replacement costs.

Driver Retention/Shortages

The driver shortage is a pending issue that must be addressed and resolved to prevent an adverse impact on the US economy. The question: “Is there really a driver shortage?” has been answered by any objective measure. Yes, the pending shortage is real and will be a major hindrance to economic growth if not properly dealt with.

Before addressing the future driver shortage, a quick look at current and past retention levels is in order. Accord10 |

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ing to the American Trucking Association (ATA), annualized turnover rate for large truckload companies in 2012 was 98%, the highest turnover rate since 2007’s 117%. Driver retention is a major challenge for the commercial trucking industry, which is a major factor in closing the driver shortage gap, addressed below.

ATA estimates the current driver shortage is between 20,000 and 25,000 to operate the approximately 750,000 over-the-road (OTR) trucks currently operating (local and private fleets excluded). It should be noted that, while less-than-truckload (LTL) carriers may face some level of future driver shortage, the greatest shortage will be within the truckload sector.

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Dire as all of this sounds, the truck driver shortage will worsen in the next decade. Current trends indicate an additional 239,000 tractor trailer drivers will be required to sustain the economy by 2022 (see Figure 2).

There is, perhaps, a silver lining for all of this bad news: employment opportunity. In a nation where the unemployment percentage recently dropped from 7.7% to 7.6%, still very high in an environment where an unemployment rate of 4.5% is generally regarded as “full employment”, the employment opportunity is substantial. To achieve growth of an additional 239,000 OTR drivers by 2022, nearly 100,000 additional drivers per year will be required. The “welcome mat” is definitely out for safe, responsible individuals who are willing to undertake the rigors of a life as an OTR driver. See Figure 3, which illustrates the critical need for additional driver hires, as well as the reason why so many drivers will soon be needed.

Please note in Figure 3 the high number of driver additions that will be required due to retirements. Our industry is graying. With an industry average age of 55 years, it is imperative that we tap into the youth of America to satisfy our driver shortage and keep the driver pool robust.

This will be no easy task for the industry in coming years for two reasons.

First, most of today’s experienced drivers come from a blue collar background, while the youth of today think “Blue Collar” is the name of a rock band. Today’s 20and 30-year-olds grew up during the onset of the technology and communication era. Driving a truck is not on their radar as a viable career path, meaning the search item “Truck Driver” won’t be “Googled” often as they surf the web seeking ideas for careers. Second, in honesty, most veteran truck drivers don’t want their sons and daughters to follow the over-the-road career path anyway. Each parent wishes their kids to have a better life than what they have experienced. Truck driving isn’t becoming more profitable or more glamorous. It is a generational continuation of a hard life at best.

Now having said all this, in fairness one must acknowledge that driving a truck can be a tough job, but also very rewarding because drivers know America depends on them for virtually everything its citizens consume. A driver is like elec-

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tricity, you take it for granted until you flip the switch and it’s not there! The irregular route truckload driver can endure weeks away from home, hostile “customers,” a crumbling infrastructure, and the daily challenge of avoiding drivers of four-wheelers texting while driving. They do their job professionally every day and every night, safely and conscientiously.

Increased Regulation

One of the hottest discussion topics in the commercial motor carrier industry has been the impact of the pending rules changes to Hours of Service (HOS), set to go into effect on 1 July 2013. Two significant new rules, pertaining to the 34-hour re-start and the 30-minute break that is required within the first eight hours of driving time has stirred significant adverse reaction within the trucking industry. Introduction of both rules will impact operations among carriers providing capacity to SDDC; both these issues will be discussed in greater detail in a later section.

Compliance, Safety and Accountability, or CSA for short, was implemented in 2010 to mixed reviews in the motor carrier industry. Because of a reasonable approach to needed changes by the governing body, the Federal Motor Carrier Safety Administration (FMCSA), many needed changes have been considered and implemented to CSA administration.

But there is work to be done, and more changes need to be made. For example, the two examples given in the immediately preceding paragraph on further changes needed regarding two new HOS rules will impact the CSA Hours of Service BASIC. The term BASIC (Behavior Analysis and Safety Improvement Categories) refers to a comparative peer rating among carriers in seven different areas: unsafe driving, Hours of Service compliance, driver fitness, Controlled Substance/Alcohol abuse, vehicle maintenance, Hazardous Material Compliance and Crash Indicator. Elevated scores in any BASIC can spell trouble for a carrier whose performance in any one of the seven BASIC categories exceeds published threshold minimum values. Commercial shippers are savvy at selecting quality carriers and routinely use the publicly viewable BASIC scores as a quality measure.

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One could wonder if increased scrutiny on driver performance might exacerbate the driver shortage issue. The answer is yes, but that is a downside that carriers must tolerate and even embrace. Here’s why. Data indicate that “seven percent of (the total of all) drivers generate a significant portion of the CSA scoring problems for carriers,” according to the ATA’s Chief Economist and Vice President, Bob Costello. Carriers are eager to identify their portion of this seven percent and get rid of them, for the benefit of the carrier and the safety of the traveling public. The drivers that get removed from the OTR population will result in further retention/recruitment challenges, but those challenges can and must be met. To tolerate substandard driver quality is not an option for responsible motor carriers.

A final motor carrier point of contention pertains to the Crash Indicator.

Though not publicly viewable, carriers are still concerned at the apparent inability to separate non-preventable accidents from preventable accidents. Simply stated, a carrier could have an artificially high crash score through no fault of the carrier. One DOD carrier related that his parked and unattended truck was struck at a truck stop. Because the vehicle had to be towed from the site, this carrier’s crash BASIC increased, even though the carrier was in no way at fault.

CSA, though needed, is imperfect. The carrier industry works diligently with FMCSA to improve the process. CSA should be considered a work-in-progress.

Another aspect of potential regulatory impacts to the trucking industry is the advent of Electronic Logging Devices (ELDs). Flight Data Recorders have been required equipment in the commercial aviation industry for decades. ELDs, which serve a similar function for trucks, are not required now, but that could soon change.

Many motor carriers believe the eventual transition to an ELD mandate is inevitable. This news does not sit well with many drivers who believe the ELDs constitute a major privacy issue.

There is massive data available which show the added value to carriers that have already converted to ELD use, whether fleet-wide or in pilot projects. The performance statistics are impressive. Hours of Service Compliance, one of the CSA

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BASICs, is a direct reflection of individual drivers obeying HOS rules. Data show that approximately four percent of drivers violate their weekly HOS restrictions.

However, carriers who have already transitioned to ELDs have experienced drastic reductions in HOS violations, and their Hours of Service BASIC scores reflect significant improvement as well.

Some believe that mandated ELD use will cause more drivers to leave the industry. To mitigate this potential result, carriers have implemented comprehensive educational programs to address driver concerns and tout the ELD’s benefits. We are seeing improvement in driver acceptance of ELDs. Of course, there will always be a few drivers who oppose ELDs because they will no longer have the option to “run hot.” Carriers must be willing to allow this small pool of drivers to simply go, and good riddance. Their departure will result in a safer highway environment for the traveling public. Any productivity degradation will be offset by more efficient scheduling and better matching of loads to individual drivers.

Recapitalization Costs

In a report to the NDTA Surface Committee, Marc Boyle, President of Boyle Transportation, highlighted a recent phenomenon related to both driver retention and increased regulation: increased cost to recapitalize equipment.

There will be a need for additional equipment purchases to satisfy anticipated capacity demands and to provide seats for newly-hired drivers. In the past, a robust pre-owned truck market was a viable source for readily-available capacity increases. Today, with increasing truck purchase demands and added regulatory restrictions on truck emissions, the value of pre-owned trucks has dramatically decreased.

There was a time when a company, whether purchasing new trucks as a company or as an independent contractor (owner/operator), could greatly lessen its recapitalization costs by trading in older vehicles. No more. Those pre-owned vehicles are rapidly approaching the end of their economically useful lives due to state, local and federal emissions requirements. In short, these tractors that are on the verge of becoming obsolete and illegal

to operate, are worth far less than trucks that would otherwise have many years of useful life remaining.

Recapitalization of equipment, mandatory for clean-air compliance, is costing carriers and owner/operators more than in the recent past. The commercial trucking industry is already beginning to experience this cost increase and must necessarily recoup the additional cost through higher rates to shippers.

Defense Trucking Industry Update

Because the defense trucking industry is a microcosm of the commercial trucking industry, many of the issues discussed earlier are similar to challenges facing those carriers who are registered and certified to move DOD freight. We are eager to share issues which have their roots in Department of Transportation (DOT) and other government agencies, and how those challenges may impact the efficient and effective movement of DOD freight.

Driver Retention/Turnover

Of the serious challenges confronting the commercial trucking industry, this one is the least impactful to DOD, at least from an operational perspective. DOD has never suffered an adverse operational impact because of a capacity shortfall.

In the last dozen years we have together been through some serious operational challenges. Lack of capacity, however, has not been a challenge. At the beginning of the Global War on Terrorism in 2001,

Because of an aggressive SDDC Carrier Performance Program, the total complement of DOD carriers has recently been reviewed, a process which reduced the total number of DOD carriers to approximately 800. Even with this reduction, SDDC’s authorized carrier pool is more than adequate to meet any foreseeable contingency requirement in support of deploying forces.

But in spite of the positive assessment above, it would be inaccurate to say there are no concerns, or that everything’s fine with regard to truck capacity. We in the trucking industry work with this issue every day, and it is our goal to convey to our government partners that there is a cost element to be considered.

Transportation is a service purchased in a free market. With the fluctuations in capacity previously discussed, coupled with the somewhat unpredictable demand by all claimants of that finite capacity, the whole process is self-regulating through the magic of supply and demand. As demand outstrips capacity, rates increase.

When the market reacts and adjusts, rates contract. The military freight requirements compete with commercial requirements on the open market.

This “primer” is necessary because, with all the issues previously discussed, government shippers will be confronted by reduced national capacity. During times of increased demand, such as a military contingency, the cost to move the required amounts of freight will go

Drivers are limited by the DOT as to how many continuous hours of daily driving and how many hours of continuous off-duty time must be spent to “restart” the weekly clock. That weekly clock restart must include 34 consecutive hours of off-duty time, which is certainly reasonable (no one wants fatigued drivers on the nation’s highways).

But, effective 1 July 2013, the 34-hour restart restriction specifies that two periods within that 34-hour off-duty period must be logged between the hours of 1:00am and 5:00am.

SDDC’s Global Freight Management (GFM) displayed rates on 110 authorized carriers. By the middle of the decade, that number had swelled to 1,300+ carriers. The industry/government partnership worked efficiently and effectively, and even minor service failures were rare.

up, owing to the increased demand on the trucking “market.” So while SDDC’s large number of qualified carriers is a good thing, each of SDDC’s carriers provides capacity as a service to the national transportation “pool.” As demand increases, rates increase.

Increased Regulation

The issue of the impact of increased regulation was discussed at length earlier in this article, but DOD-specific impacts are appropriate discussion topics.

The HOS discussion above spelled out the challenges facing carriers and drivers, but two particular areas will impact the industry’s ability to effectively serve its military customers.

The first of these is the new weekly hours restart change. Drivers are limited by the DOT as to how many continuous hours of daily driving and how many hours of continuous off-duty time must be spent to “restart” the weekly clock.

That weekly clock restart must include 34 consecutive hours of off-duty time, which is certainly reasonable (no one wants fatigued drivers on the nation’s highways). But, effective 1 July 2013, the 34-hour restart restriction specifies that two periods within that 34-hour off-duty period must be logged between the hours of 1:00am and 5:00am. Due to the way drivers operate, particularly those hauling military commodities, the requirement for two consecutive 1:00-5:00am off duty periods adds a significant productivity penalty, which in worst case can necessitate as many as 50-hours of off-duty time to log a compliant 34-hour restart. Many carriers have filed motions for relief from this pending requirement, thus far without success.

The other rule referenced pertains to the mandatory requirement that driving is not permitted if more than 8-hours have passed since the last off duty/sleeper period. The rule requires an “off duty” log entry, which will adversely impact productivity just like the rule change discussed above. For military shipments requiring protective services (dual drivers), the second driver may be on a planned sleep period. To remain in strict compliance with the new rule, the onduty driver would be required to revert to off-duty status and therefore, has no choice but to wake up the second driver, thereby interrupting the sleep pattern.

This requirement could impact a driver team’s productivity for days as a result.

The DOT was earlier petitioned and granted a partial exemption to this rule when drivers are hauling explosives in categories 1.1 to 1.3; the driver is allowed to remain “on duty,” but not drive for a www.ndtahq.com | 13

30-minute period, thereby satisfying a “modified” rest period requirement. This exception is good, but does not go far enough. For military readiness purposes, this exception should be expanded to include all loads requiring Transportation Protective Services (TPS). The TPS carriers and SDDC have partnered to write an exception request to DOT to expand the amended rule for explosives 1.1 to 1.3 to include all TPS shipments.

There has been a lot of discussion about ELDs in our industry. The cost to implement and the expected pushback by drivers are considerations on one side of the equation, and expected safety, productivity and HOS compliance improvements are on the other side of the equation. Many in our industry believe an ELD mandate is inevitable in the future. Certain trade publication scuttlebutt predicts an ELD mandate date as early as 2014, with a phase-in period for the two years after that. While the actual timeline may change, the carrier industry believes an ELD mandate is a matter of when, not if.

The California Air Resource Board (CARB) has enacted some strict environmental standards for truck operation in that state. The industry, both commercial and military, has long since moved beyond the initial “this will hurt too much, let’s talk about it” philosophy, to a “let’s get on with it” philosophy.

Some of the nation’s truck fleet is already non-compliant, and many other trucks are nearing their compliance deadline in the near term. There are allowable temporary stopgap modifications which will extend the life of certain later model trucks (by installing an expensive aftermarket filter costing $15,000). The ultimate goal California is proceeding toward is a fleet of clean, new or nearlynew trucks. The impact to DOD and commercial shippers is that, until the nation’s entire fleet has been upgraded or replaced with newer models, available truck capacity into and out of California will be impacted.

By far the greatest concern within DOD’s trucking industry, at least to those who are registered as TPS carriers, is the impact of the Service Contract Act (SCA) on both carriers and DOD as a result of the conversion from a tenderbased TPS freight management, to a con14 |

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tract compliant with the Federal Acquisition Regulation (FAR).

The most onerous impact associated with the transition to FAR, at least from the industry’s view, is the FAR requirement to comply with the Service Contract

Figure 3. Average Number of New Drivers Needed Per Year Over the Next 10 Years: 96,178

Act. SCA compliance is a routine inclusion in a FAR contract’s list of Representations and Certifications. In other words, as a condition of accepting a federal contract award, the offeror agrees to abide by all requirements in the Performance Work Statement (PWS), one of which is the agreement to comply with the SCA. Moving to a FAR-based system adds complexity, costs, uncertainty, and decreased efficiency. This is principally due to the impact of the application of SCA upon the carriers.

It should be noted that carriers can and will become SCA compliant, establishing effective SCA compliance programs. However, the application of SCA to irregular route, non-repetitive long haul trucking, a majority of which is moved by owner operators, will place an unnecessary administrative systems and cost burden on carriers, many of which are small businesses. Carriers have provided SDDC and USTRANSCOM with solid data indicating the TPS rates will increase to cover the carrier’s compliance costs. The additional cost will be an unwelcome surprise to the services and DLA, particularly in view of severe budget reductions and the still uncertain impact of sequestration.

The irony in all of this is that SCA compliance is an administrative require-

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ment, enacted in law in 1965, that provides a “solution” to a problem that does not exist in the DOD TPS trucking industry. TPS drivers are elite operators, each of whom has a DOD secret clearance, and are compensated at higher rates than most drivers anywhere else in the trucking industry. Further, there are a finite number of drivers in our nation who are capable of meeting the high quality standards required to become certified to move TPS freight. Carriers understand this and pay them very well to avoid losing them to competitors.

Industry strongly believes, and DOD for that matter has for many years, reasonably considered the tender system to be exempt from the requirements of the SCA—presumably based on the statutory exemption “for any contract for the carriage of sited in 41 U.S.C. 356, which any contract for the carriage of freight… by tucks, express, railway line…where published tariff rate are in effect.” We were also unsuccessful in our request of USTRANSCOM to petition for regulatory exemptions from SCA based on the authority of the DOL to grant such an exemption. The TPS industry is committed to serving the war fighter and we have pledged to the DOD leadership our continued support.

Conclusion

The health of the nation’s trucking industry is good. Future capacity can and must grow to replace drivers and accommodate growth in the American economy. There are many other challenges that face the industry in the near future, including coping with increasing regulation and capital equipment replacement. Indeed, shippers know capacity will get tighter. They are developing comprehensive capacity plans, with metrics, focused on mode optimization, responsiveness, reliability, cost, technology capabilities and intransit visibility.

They view transportation as a value-added service for their customers, and don’t commoditize transportation. Freight rates will go up and down, mirroring the commercial economy.

Finally, the industry is gratified that, in the spirit of partnership, issues of great importance can be worked by industry and USTRANSCOM, under the NDTA umbrella, to achieve the best possible outcome. DTJ

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Leading the DOD Transportation Evolution

By Tye Beasley, DTCI Program Manager, SDDC

I

t’s no secret that many of the most effective companies use third party logistics providers, or 3PLs, to manage at least some of their transportation management functions. With an opportunity to achieve cost savings, obtain better access to performance data, improve customer service and improve the quality of actionable shipment data, Department of Defense (DOD) leadership recognized the potential to improve the department’s transportation processes and services.

Following several in-depth studies and a three-year prototype effort, the stage was set to acquire the services of a 3PL to fulfill a subset of DOD’s continental United States surface freight transportation requirements.

The Defense Transportation Coordination Initiative (DTCI) Program Management Office (PMO) also sought industry collaboration and purposely included both commercial experts in the transportation field and trade associations very early in the program. There were several group sessions, “one-on-one” opportunities, and other formal meetings held among the program office, potential offerors, and a number of trade associations interested in DTCI. 16 |

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From the beginning, an ambitious agenda has been in place to transform the way DOD approached its management of commercial transportation services. The cornerstone of this program was the collaborative partnership with Menlo, the military services and the Defense Logistics Agency (DLA) to integrate commercial best practices into the supply chain.

The PMO issued several formal requests for information that generated a tremendous response. Equally as important, the office held two meetings in preparation to finalize the solicitation. More than 120 industry representatives from more than 30 companies and trade associations attended and provided valuable input directly influencing the program. Because of this extensive collaborative effort, the DTCI program was ready for solicitation.

In June of 2007, US Transportation Command (USTRANSCOM) issued the formal request for proposals and eventually awarded the DTCI contract to Menlo Worldwide Government Services that August. The contract ensured a measured, data-driven path forward to include frequent opportunities to review performance and adjust, as needed.

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The first DTCI site went live in March of 2008 and the program office completed its 115th, and final, site implementation in December 2011.

The DTCI program resided with USTRANSCOM until it transitioned to its surface component, the Military Surface Deployment and Distribution Command (SDDC), in October 2010.

From the beginning, an ambitious agenda has been in place to transform the way DOD approached its management of commercial transportation services.

The cornerstone of this program was the collaborative partnership with Menlo, the military services and the Defense Logistics Agency (DLA) to integrate commercial best practices into the supply chain.

Through this partnership, DTCI brought a shift in transportation procurement phi-

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losophy from the decentralized marketbased tender system that served the government for decades to a more strategic, long-term contracting approach consistent with most commercial counterparts.

DTCI also made a significant investment in the government’s information technology through its seamless integration of a transportation management system into the existing information technology infrastructure. This transformative approach represented a sea of change in the way DOD conducted commercial transportation business.

DTCI had an immediate impact. The government suddenly had centralized visibility to all aspects of its transportation activity and a quality transportation dataset that legacy transportation systems could never offer. Menlo now managed carrier performance electronically, allowing the government the ability to measure and enforce the stricter tender acceptance, pickup and delivery requirements included in this new Federal Acquisition Regulation (FAR)-based contract. Delivery performance improved. While full utilization of the Transportation Management System (TMS) would take time, Menlo was able to optimize carrier and mode selection based on load dimensions and requested delivery dates.

The relative size of DOD as a shipper, in theory, can generate significant purchasing power. However, in reality, DOD operated in a decentralized manner, with each individual shipping activity responsible for managing its own freight. By centralizing all freight buying activities, the DTCI program was finally able to leverage this volume, going to market with a consolidated solicitation that allowed carriers to bid on profitable lanes in tandem with the less desirable ones. Freight costs reduced significantly under the program, particularly for van truckload and less than truckload, or LTL, service.

The DTCI is a success on multiple levels, but none more important than helping the DOD move its outdated culture and systems into the 21st century. In fact, DTCI paved the way for SDDC to continue developing a modern, accountable, and proactive logistics system that spans beyond the scope of the program.

DTCI introduced the concept of a single shipper system through its interface with a TMS. Carriers, shippers and con18 |

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signees require access to only one system to track or update the progress of their shipments. Additionally, SDDC logisticians can now manage all transportation activity within the program using a single source of data. Every stakeholder has the same view of the network and access to the same information at the same time. With the success of DTCI, and the amount of data a centralized TMS affords, there are growing discussions concerning potential expansion of automation initiatives and a

acknowledge and incorporate the lessons learned throughout this endeavor into the larger DOD transportation policy where possible.

Based on an Enterprise Analysis conducted by Logistics Management Institute (LMI is a support and analytical contractor to the DTCI PMO), our customers had a clear view of performance of each mode, equipment type down to the site level enabling the program office to adjust the contract for its final push.

One significant development DOD faces in managing its large base of commercial service providers is the emphasis to transition all tenders to FAR-based contracts. These contracts provide a greater level of transparency to the government and provide a much greater level of control and enforcement of performance requirements.

TMS-like capability to manage CONUS freight. The question becomes, does it make sense to maintain three independent shipping systems, especially when none offers the quality of data and visibility of a modern TMS? One significant development DOD faces in managing its large base of commercial service providers is the emphasis to transition all tenders to FAR-based contracts. These contracts provide a greater level of transparency to the government and provide a much greater level of control and enforcement of performance requirements. However, they can be rigid and contracting officers must take care to ensure operational effectiveness and flexibility. DTCI provides one example of a program that meets the requirements of a FAR contract, but leaves the flexibility necessary to manage DOD’s logistics operations. SDDC now has a blueprint to migrate the remaining freight to FAR contracts. The lessons learned from this revolutionary project will influence the development of DOD transportation policy well into the future.

Managing change of this magnitude within large organizations comes with some inevitable challenges and DTCI certainly experienced a few. As the contract moves into its last remaining award term option year, fiscal 2014, it is time to evaluate the program to identify and correct what is not working as intended. In order to move forward, it is imperative to

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A recent contract modification removed specialized and flatbed equipment types from across the enterprise except for US Air Force installations that are in the program. The modification also removed 25 low volume sites that did not offer enough volume to garner significant cost avoidance, even with the program’s positive results in other areas of the country.

As the Program Office continues to search for efficiencies and reduce overhead to our customer base, SDDC expects more changes to the contract in the near future.

The DTCI program continues to be a great learning exercise for DOD. A major goal of this initiative was to incorporate best commercial practices into government processes wherever possible. As theory gives way to operation, it becomes clear where some practices or requirements may need adjustment. While there are many lessons learned throughout this contract, a few of those had a large impact on the program’s effectiveness. Some of these issues centered on contractual requirements, and were the easiest to correct. Others are systemic in nature, and deeply embedded in the old mantra of “we’ve always done it this way.”

Some requirements of the program create pressure on the contractor to shift freight to a more time-definite mode of delivery such as air or expedited service, or to choose a less economical transportation service provider in order to satisfy those requirements. The DTCI contract

did not include a reliable transit time guide such as was included in the Defense Transportation Regulation. The contract, however, does place importance on delivery performance. It requires local transportation offices to specify a delivery date, and requires Menlo to meet or exceed on-time performance goals. Faced with sometimes arbitrary delivery dates and a requirement to provide service to meet it, Menlo has been unable to use lower cost providers such as an LTL carrier. DOD in this instance made a choice to pay for a higher level of service albeit one of the strictest in DOD logistics, Menlo and its sub-carriers have met these requirements at the enterprise level.

The nature of DOD’s mission led DTCI planners to establish short lead times to the amount of time given to secure a carrier and pickup for each load (Menlo must secure a firm tender acceptance within four hours, and must have that load picked up within eight hours).

In an effort to standardize requirements, the team leading the DTCI contract development elected to enforce this requirement across all sites and equipment types.

Realizing some DOD shipments may have short lead times to meet mission critical deadlines or requirements, it is now obvious that the use of these shorter lead times has had unintended consequences for much of the freight in the DTCI program. Specifically, it discourages lower cost carriers under contract with Menlo from accepting DTCI offers.

The requirement to have every load tender accepted within four hours may work well for LTL freight, but was difficult for specialized equipment that is subject to available capacity.

Additionally, the program was not immediately able to capture some benefits because DOD shipper system changes took longer to implement than anticipated. Program managers expected the largest source of savings to result from full utilization of the TMS. However, it was not until recently that changes to some government systems were in place to accept an optimized transportation solution from the TMS, such as aggregations. Additionally, external organizational metrics often conflicted with the metrics of the DTCI program and overrode concerns

about efficient transportation. Shippers were often discouraged from increasing order lead time or holding freight in an attempt to consolidate shipments because internal metrics measured how fast the warehouse cleared freight from the floor.

The good news is that the program has made the investment, and is now poised to begin capturing more optimization opportunities in the future. Better utilization of the TMS should result in a shift from the small LTL shipments that dominate the DTCI profile, to more use of multi-stop truckloads. This would provide opportunity for more truckload carriers and small businesses to compete for DOD freight, which had been a source of contention from industry.

The insight gained and the lessons learned through the last four years of DTCI operation add tremendous value to future visions for DOD transportation. SDDC will continue to redefine its transportation process by applying these lessons where it can, and using the abundance of actionable data produced from the program to continue to drive improvements. DTJ

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The Case for Portable Moving and Storage Containers Can Save the DOD’s Personal Property Program Millions

By Ben Cross, National Account Manager, 1-800-PACK-RAT

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he Department of Defense’s (DOD) Defense Personal Property Program (DP3) is a $2.2 billion per year program. The DOD moves 300,000 outbound shipments per year, both domestically and internationally, for all branches of service and some defense agencies. It is currently comprised of approximately 850 domestic Transportation Service Providers (TSPs) and around 200 international TSPs. These service providers work together to make sure our military families, and their property, arrive safely at the next duty station.

Dramatic improvements have been made to the Personal Property Program to reduce costs and improve service to the military member over the past seven years. Some of these changes included the implementation of the Defense Personal Property System (DPS), consolidation of 151 Personal Property Shipping Office (PPSO) activities into 17 Joint PPSOs (JPPSOs), among others. These improvements have reduced both the cost for shipping household goods and the cost for administering the program. However, ongoing pressures to lower costs and improve service within the program persist.

The ongoing critical challenge the Personal Property Program faces is decreasing capacity. Chuck White, Director of Government and Military Relations at the International Association of Movers (IAM), estimates there has been a 30% decline in long-haul drivers in the US household goods industry over the past five years. For the purpose of this article we will assume this shortage of supply will not affect the cost of moving. However, this shortage of trained CDL drivers already leaves TSPs without enough trucks to service shipments during the peak moving season.

Roughly two-thirds of the shipments in the DOD typically fall within one-third of the year, May 15-September 1, according to Armstrong Relocation. Due to the 20 |

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high volume of shipments and the limited number of trucks available, service members often have to schedule moves weeks in advance or risk lengthy delays. This can place an undue strain on service members and their families. Fortunately, there are some alternative solutions.

As many military members know the Do-It-Yourself (DITY) move, or Personally Procured Move as it is officially called, is a great solution for anyone who needs to get their shipment picked up immediately.

Twenty years ago, rental trucks would have been the only option for a DITY move.

However, over the past ten years, Portable Moving and Storage Container (PMSC) companies have become a great new option for DITY moving. PMSCs combine the portability of a truck with the functionality of a mini-storage unit, all while eliminating the need for the service member to drive a truck and/or load stuff into mini-storage at the destination. Furthermore, since the government reimburses service members 95% of what it would have paid to contract the move, these service members are able to keep the money they saved the DOD as an incentive. This incentive can be thousands of dollars and quite lucrative for service members. Many companies, including TSPs and their agents, are now specializing in providing labor services to pack and load PMSCs for military members. Service members can even hire well-qualified labor providers, such as Moving Staffers, to do the packing and loading for them. This gives service members the similar whiteglove service they would experience with a TSP using a padded van, except at the cost of using a container.

In cases where the service member contracts with labor providers, the effect can be the same as a full-service move, with all the goods professionally packed and loaded. However, due to reduced handling of the shipment as it goes into storage, the

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costs of storage are comparatively minimal. In fact, when comparing the total costs of a traditional TSP move with storage, the savings can be anywhere from 8% to 34%. The degree of savings depends on the size of the shipment and the distance.

The largest corporate clients in the world have been using containers for years because of this cost savings.

Let’s look at a sample move from Norfolk, VA to San Diego, CA, using the military’s actual pricing on its 400NG tariff.

Most TSPs will offer generous discounts to bring down these tariff prices. For

this scenario we will use a very competitive 70% discount on transportation and a 55% discount on storage. With these discounts, the TSP’s total cost to the government for a 10,000 pound shipment (a lightly furnished three bedroom house) with 15 days of storage is approximately $11,573. While if using a container carrier the same 10,000 pound shipment would cost approximately $8,145. That’s a savings of over $3,500. This represents about 30% savings on a moderately sized shipment. Military household goods shipments can be as large as 18,000 pounds, in which case the savings would increase.

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In addition to the savings described in this example, some PMSC companies are finding even more innovative methods to improve cost savings and overall efficiencies. For example, 1-800-PACK-RAT has created a container that when empty can be collapsed and shipped fifteen to a flatbed, this represents an 80% savings on repositioning costs. Repositioning costs are not the only efficiency measures being realized. Experts agree that rail and intermodal shipping is the future of surface transportation. With advances in Container On Flatcar (COFC) shipping, on time rates are at 95% and containerized household goods claim rates beat the published American Moving and Storage Association average. PMSC companies like 1-800-PACK-RAT are leading the household goods industry into capitalizing on this lower cost, more environmentally sustainable mode of transportation.

BNSF Railway estimates that intermodal transportation reduces carbon emissions 40-60% since rail is twice as fuel efficient as trucks. The use of intermodal shipping also eliminates dependence on long-haul truck drivers, whose services are already at a severe shortage. Yet, the best part about containerizing household goods and shipping them with rail, is the 20-30% cost savings of shipping long distances.

These innovations are great for the military member and average consumer, but how can the DOD benefit from the widespread adoption of portable moving and storage containers? There are steps that can be taken to integrate this new generation of containers into the DP3 program, but it will take time and program changes. Some may question—is the effort worth the reward?

In order to better understand the costsavings of using PMSCs for military household goods shipments, consider the following: • The DOD’s annual household goods program spends $2.2 billion on moving costs; • 60% of this spend, or approximately $1.3 billion, is on domestic shipments; • Of this, only 60%, approximately $792 million, can be serviced at origin and destination by PMSC companies due to limitations in the footprint; • Assume only 50% of all shipments, or approximately $396 million, require storage in transit; • Where storage is used, PMSC ship22 |

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1-800-PACK-RAT’s fire resistant, all-steel containers can hold around 6,000 pounds. Strong enough to move whatever is needed, these specialized containers can then be flat packed and strapped on a flatbed for (costeffective) repositioning.

ments average 20% savings on total shipment cost for corporate clients; • With proper shipment planning, if all shipments requiring storage utilized available container networks the DOD could save $79 million.

If utilizing these containers can save the program $79 million annually that would be enormous. Currently, the DOD is confronted with the reality of severe budget cuts for the next ten years. Even if the actual savings on containerized shipments was only 20% of the scenario outlined above, the DOD could achieve a cost savings of $15.8 million. That is still a very significant number.

To realize the potential (tens of millions of dollars) savings the DOD would only have to do two things. First, it would have to open participation in the DP3 program to container companies. In order to include PMSCs into the program, DOD would need to change language in the Defense Transportation Regulation Part IV that has restricted PMSC providers’ participation. This step would add transportation and storage capacity.

The second change needed to realize the full cost-savings outlined above, would be to develop a new code of service with its own rate structure for PMSC providers.

For argument’s sake let’s call this “Code C.” Currently, there are two codes of service used for domestic shipments. The primary code of service is Code 1, which is used on 98% of shipments and has historically been serviced by trucks. The second is Code 2, which must be containerized and is traditionally serviced by “crating and freighting” shipments in large wooden crates or heavyduty cardboard containers. Although, Code 2 exists to force carriers to containerize shipments, it is rarely used (typically by request or on shipments to Alaska). Code 2 does not

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represent a significant cost-savings because the pricing structure and rates are similar to those filed for Code 1. In addition, Code 2 requires onerous handling to load into and out of these wooden containers.

A separate rating system for a “Code C” would allow PMSC providers to file line haul rates between specific metro areas, not regions, and file storage rates for a low monthly fee. This pricing structure would effectively eliminate most storage related fees like first day handling charges, daily storage fees, fuel surcharges and cartage, which are not charged by container companies.

Is it truly feasible to put every shipment destined for storage into portable moving and storage containers? Probably not.

Although there are a quarter million of these containers, it’s unlikely there will be enough available exactly when and where they are needed to accommodate 60,000 shipments annually. However, the business case for PMSC inclusion into the DP3 program is compelling. Allowing portable moving and storage containers to compete on a level playing field with other modes of transportation will spur competition and introduce much needed innovation to the DOD’s Personal Property Program. Containers have been revolutionizing the consumer moving and storage industry for the past decade. It is now time to see the DOD embrace this technology and take advantage of the capacity and cost-savings. DTJ About the Author: Ben Cross has been working in the household goods container business since 2006. He is currently the National Account Manager for 1-800-PACK-RAT and helps military and corporate clients achieve their mobility goals. He has previously served as the NDTA Tampa Bay Chapter President (2010-2013) and was awarded an NDTA Distinguished Service Award in 2012.

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We welcome and encourage diversity in our workplace.

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Chapter Spotlight Spotlight on Mentoring Jeff Campbell Chapter Liaison It has been a tremendous privilege to serve as the NDTA Chapter Liaison and A-35 Representative for the past four years. In a way, I was in contact with 60 mentors during that time, some who led their local chapter for decades, some who brought energy from one chapter to the next when they PCS’d, and some who built a chapter from the ground up—all of them volunteers. With my last Chapter Spotlight column, it’s only right to shine a light on one of NDTA’s chapters’ most successful programs, the Washington, DC Chapter LTG Edward Honor NDTA Mentoring Group. Like other Young Professionals in this program, I have learned how valuable NDTA membership is and I am certain it will serve me well in the next chapter of my career. I hope to see you at a future NDTA Event!

Mentoring in Metro DC

By LT Todd Lisowski, SC, USN and LT Jason Ray, SC, USN

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he NDTA Mentoring Group kicked off its 2012-2013 Program in October 2012 with another distinguished lineup of military and private sector logisticians who donate their time as speakers and mentors. This year’s protégés are a select group of young, career-minded military and civilian professionals seeking to develop a professional network and figure out the next steps in their respective careers. The program, facilitated by CAPT Bob Marcinek, SC, USN (Ret.), meets monthly, and the format consists of a social hour and a group discussion oriented around an individual speaker’s topic. A wide range of topics have been discussed thus far, including leadership, career path and progression, and situational logistics.

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After each guest speaker’s presentation, the group is broken out into one-on-one mentoring sessions where protégés and mentors can address specific topics pertaining to their careers, and further cultivate a relationship.

The program has brought in an extremely successful group of guest speakers. In October, Jimmy Norcross, Partner, IBM Global Business Services, stressed the importance of developing a healthy digital presence while still maintaining face-toface contact with your mentors and peers.

Next, in November, RADM Rob Reilly, USN (Ret.), Senior Vice President, Science Applications International Corporation (SAIC), introduced Nancy Melone, a long-time successful corporate recruiter for Microsoft and Google, who along with RADM Reilly, discussed strategies and tactics for successful career transition.

No meeting was scheduled in December due to holiday season conflicts. In January 2013, Bill Kenwell, Senior Vice President and Chief Commercial Officer, Maersk Line, Limited, spoke about his rise through the management levels in the commercial transportation industry. Mr. Kenwell also distributed numerous influential leadership references to the group, including LTG John D. Bruen’s, USA (Ret.) wallet card for command and leadership. Then, in February, Trish Young, USAF A4/A7, Deputy Chief of Staff for Logistics, Installations and Mission Support, spoke about the difficult budget environment the Pen-

tagon now faces and reinforced the notion that “when under stress, you’ll learn more about your leader than any other time.”

During the group’s most recent meeting in March, the speaker was VADM Mark Harnitcheck, SC, USN, Director, Defense Logistics Agency, who lead a discussion on crisis management and the logistics leadership required to successfully navigate adverse situations. He discussed the massive effort that went into mitigating the effects of Hurricane Sandy and how it differed from the way Hurricane Katrina was handled. In April, the program’s last speaker of the 2012-2013 year was MG Charlie Fletcher, USA (Ret.), Senior Vice President, Alion Science and Technology.

MG Fletcher discussed the importance of being honest and open in your communications with subordinates, peers, and supervisors.

This Washington, DC Chapter LTG Edward Honor NDTA Mentoring Group bridges the gap between the most seniorlevel leaders and logisticians, and young, mid-level professionals who might not otherwise have the opportunity to work together. It offers the chance to interact with career-minded, goal-oriented professionals in the same peer group, who are working through many of the same workplace challenges. It is an incredible opportunity and a wonderful experience for all involved. DTJ For more information on the DC Chapter, visit www.ndtadc.org.

The LTG Edward Honor NDTA Mentoring Group poses for a picture with VADM Mark Harnitchek, Director, Defense Logistics Agency.

june 2013

DOD, Global Supply Chain and Supply Chain Talent Shortages Irvin Varkonyi, President, Supply Chain Operations Preparedness Education (SCOPE) ivarkonyi@scopedu.com

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he February 2013 issue of the DTJ offered a comprehensive overview of the recent Department of Defense (DOD) mandate placing responsibility on contractors to address the counterfeit issue, a growing problem for DOD’s global supply chain. While it suggested that improved chain of custody processes can be implemented utilizing container security devices, it did not recognize a critical hole in the DOD’s supply chain.

This supply chain is operated by the private sector, as civilian contractors, and currently has an insufficient supply of educated and trained supply chain professionals who understand the dynamics of optimizing supply chain performance while minimizing supply chain vulnerabilities. Rising compensation for supply chain professionals demonstrates the industry’s shortage.1 The DTJ article offered a 2007 study commissioned by US Customs and Border Protection which validated the benefits claimed by the Customs Trade Partnership Against Terrorism (CTPAT) for importers who participated in the program. Another report, written by AT Kearney in 2006, discussed Smart Boxes’ advantage in real time tracking of containers. And finally, a 2007 Stanford study on innovators in global supply chain security took the experience of a dozen companies from which it drew conclusions for the entire supply chain industry. Much has happened since these studies were conducted and much has been learned on supply chain risk management.

The priority on security right after 9/11 did not afford sufficient attention to redesign the global supply chain in order to make it work more efficiently while reducing its vulnerability. We had a natural reaction to the threats imposed on the movement of goods around the globe. This conflict between efficiency and vulnerability was not apparent in supply chain degree programs in universities and professional associations. We were all intoxicated by the go-go 90’s, free of global conflict

and riding the high tech bubble. We did not anticipate the vulnerable global supply chain that we came to see in the first decade of the 21st century, nor the technology that came to drive supply chains.

Thus, we note the shortage of supply chain talent which must address the complexity of today’s supply chains and not focus excessively on one element (i.e. security vs. efficiency). Utilizing “Supply Chain Risk Management” we gain a tool which can be a better guide to study of supply chains compared to earlier approaches.2 A recent study, which will be-

and trained supply chain professionals to manage this balancing act.

While we are not in a position to state that Smart Box containers are, or are not the answer to securing the flow of containers, we may state that supply chain education and training must be strategic and provide the tools to find the right balance in supply chain risk. More plainly stated, container security is more than a matter of electronic, internet based hardware, as stated in the February 2013 issue of the DTJ. Can we learn to manage the volatile supply chain with improved edu-

We had a natural reaction to the threats imposed on the movement of goods around the globe. This conflict between efficiency and vulnerability was not apparent in supply chain degree programs in universities and professional associations. We were all intoxicated by the go-go 90’s, free of global conflict and riding the high tech bubble. We did not anticipate the vulnerable global supply chain that we came to see in the first decade of the 21st century, nor the technology that came to drive supply chains. come a classic in this new approach, is XSCM, the New Science of X-Treme Supply Chain Management.3 The University of Maryland textbook proffers that global supply chains must adapt to extreme volatility as the new norm. “We should expect volatility as the new norm and use it to our advantage,” says Sandor Boyson, one of the co-authors.

What is the state of supply chain professionals today, in this state of increasing volatility? “Ironically, in this time of record-high unemployment, 15% of supply chain positions are open on the average.

Most of these openings are at the middle management level.”4 Therefore, in an era of great concern about supply chains— fear of containers holding weapons of mass destruction, fear of excessive costs to protect the supply chain, or fear of having to trade off ROI against security, we have an insufficient supply of educated

cation and training in supply chain risk management? Consider disruptions to the volatile supply chain since the tragedy and catastrophe of the 9/11 attacks: 1. Hurricane Katrina – disrupted flow of goods, including 25% of US agricultural commodities which flowed through the port of New Orleans.

2. Japan Earthquake and Tsunami – devastation of suppliers near the stricken zone suspended operations for a variety of products as global supply chains took a risk on single source production, such as Toyota vehicles.

3. Hurricane Sandy – disruption of transportation of vehicles due to flooding of port side warehousing (also by Toyota).

Supply chain risk management, now becoming a more prominent component continued on page 28

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N’S CIR RMA CL AI E H C

AAR CORP. + PLUS Agility Defense & Government Services + PLUS American Shipping & Logistics Group + PLUS APL Limited + PLUS Atlas Air Worldwide Holdings + PLUS Avis Budget Group + PLUS Bennett Motor Express, LLC + PLUS Bristol Associates + PLUS CEVA Logistics + PLUS Choice Hotels International + PLUS Coyote Logistics + PLUS Echo Global Logistics, Inc. + PLUS FedEx + PLUS Final Mile Logistics + PLUS Hapag-Lloyd USA, LLC + PLUS InterContinental Hotels Group Americas + PLUS Landstar System, Inc. + PLUS Liberty Global Logistics-Liberty Maritime + PLUS Maersk Line Limited + PLUS National Air Cargo + PLUS Omni Air International + PLUS Panther Expedited Services, Inc. + PLUS Ports America + PLUS Rock-It Cargo USA, LLC + PLUS Science Applications International Corp. (SAIC) + PLUS Supreme Group USA, LLC + PLUS TOTE, Inc. + PLUS Universal Truckload Services, Inc. + PLUS UPS + PLUS

A Team Logistics LLC Aeroscraft American Roll-On Roll-Off Carrier Best Western International BNSF Railway CSX Transportation Cubic Global Tracking Solutions, Inc. DB Schenker

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DHL Global Forwarding Evergreen International Airlines, Inc. Global Aviation Holdings Inc. Hertz Corporation Horizon Lines, LLC IBM Innovative Logistics, LLC International Shipholding Corporation KGL Holding

Lockheed Martin Matson Navigation Company Inc. Norfolk Southern Corporation The Pasha Group R & R Trucking Raith-CTS Logistics SkyBitz, Inc. Union Pacific Railroad

These corporations are a distinctive group of NDTA Members who, through their generous support of the Association, have dedicated themselves to supporting an expansion of NDTA programs to benefit our members and defense transportation preparedness.

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june 2013

HONOR ROLL

OF

SUSTAINING MEMBERS AND REGIONAL PATRONS

ALL OF THESE FIRMS SUPPORT THE PURPOSES AND OBJECTIVES OF NDTA

SUSTAINING MEMBERS 1-800-PACK-RAT AAT Carriers ABF Freight System, Inc. Accenture ACTCO-Afghanistan Logistics Air Transport International, LLC Airlines for America AIT Worldwide Logistics, Inc. Alaska Airlines/Alaska Air Cargo Al-Hamd International Container Terminal American Maritime Officers Amyx Apex Logistics Group Arven Services, LLC Associated Global System Atlas International Baggett Transportation Company Blue Water Shipping US, Inc. Booz Allen Hamilton Engineering Services, LLC Boyle Transportation, Inc. C2 Freight Resources, Inc. Cardinal Transport, Inc. Carlile Transportation Systems Carlson Rezidor Hotel Group CGI Chalich Trucking, Inc. Chamber of Shipping of America Citigroup Comtech Mobile Datacom Corporation Covenant Transport Coyne Airways Crowley Maritime Corp.

REGIONAL PATRONS Acme Truck Line, Inc. AFC Worldwide Express dba R+L Global Logistics Agile Defense, Inc. Alaska Marine Lines Alaska West Express All-Lift Systems, Inc. Allswell Supply Company American Moving & Storage Association American Trucking Associations Association of American Railroads ATS Specialized, Inc. Benchmarking Partners, Inc. Blkbird, Inc. The Boeing Company C5T Corporation CakeBoxx Technologies Cargo Experts Corp.

Cargotec USA, Inc. The Cartwright Companies Cavalier Logistics

CRST Logistics, Inc. CWT SatoTravel DAMCO Delta Air Lines DHL Express Dollar Thrifty Automotive Group Door to Door Storage Inc. Dynamics Research Corporation Enterprise Database Corporation Express-1, Inc. Fikes Truck Line Fluor General Dynamics/American Overseas Marine GeoDecisions GID – Get It Done, LLC Greatwide Truckload Management Hilton Worldwide Hub Group, Inc. Intermarine, LLC Intermodal Association of North America (IANA) International Longshoremen’s Association (ILA), AFL-CIO International Organization of Masters, Mates & Pilots Interstate International J. B. Hunt Transport, Inc. Kansas City Southern Keystone Shipping Co. Knight Transportation Krown1 Fzc KU Transportation Research Institute Kuehne + Nagel, Inc. Labelmaster

LMI Lockheed Martin Aeronautics M2 Transport Mack Defense Marine Engineers’ Beneficial Association Martin Logistics Incorporated Mayflower Transit McCollister’s Transportation Systems, Inc. Medallion Transport & Logistics, LLC Menlo Worldwide Logistics Mercer Transportation Company Military Officers Association of America MV Transportation, Inc. National Air Carrier Association National Van Lines, Inc. North Carolina State Ports Authority Ocean Shipholdings, Inc. Ocean Star International, Inc. Omega World Travel One Network Enterprises, Inc. Omnitracs, Inc., a Qualcomm Company ORBIS Corporation OSG Ship Management, Inc. Overdrive Logistics, Inc. Panalpina Pilot Freight Services PODS Port of Beaumont Port of San Diego Posidon Pratt & Whitney Preferred Systems Solutions, Inc. Prestera Trucking, Inc. Priority Solutions International Priority Worldwide Services

Radiant Logistics Partners LLC Ramar Transportation, Inc. Ridgeway International USA Inc. Roadrunner Transportation Systems Rockey’s Moving & Storage, LLC Sammons Trucking SBA Global Logistics Services Seafarers International Union of N.A. AGLIWD (SIU NA) Sealed Air Corporation Sealift, Inc. SEKO Southwest Airlines Co. SRA International, Inc. Teradata Corporation Textainer Equipment Management (U.S.) Limited The Exchange The Parking Spot The Port of Virginia TQL Transportation Institute Transportation Intermediaries Assn. (TIA) Transportation Management Services Tri-State Motor Transit Co. (TSMT) Truva International Transportation and Logistics TTX Company Tucker Company Worldwide, Inc. United Airlines United Van Lines, Inc. UTi Aerospace and Defense Group Wagler Integrated Logistics, LLC Winston & Strawn LLP Women In Trucking Association, Inc.

Center for the Commercial Deployment of Transportation Technologies (CCDoTT) Ceres Terminals Incorporated Chapman Freeborn Airchartering Chassis King, Inc. C.L. Services, Inc. Colorado Technical University CR Transport & Logistics EADS North America Enterprise Holdings Erudite Company Estes Forwarding Worldwide, LLC Europcar Car & Truck Rental FlightWorks FMN Logistics Fox Rent A Car Green Valley Transportation Corp.

Guard Transport, Inc. Hanjin Intermodal America, Inc. IdenTrust, Inc. JAS Forwarding K & S Trucking, LLC Kalitta Charters, LLC LMJ International Logistics, LLC

Load Delivered Logistics, LLC Marriott International MCR Federal, LLC McLane Advanced Technologies Mi-Jack Products Military Sealift Command (MSC) Miramar Transportation Morten Beyer & Agnew Motionology, Inc. M-Pak Incorporated Naniq Global Logistics LLC National Motor Freight Traffic Association, Inc. NCI Information Systems, Inc. NFI NovaVision, Inc. Oakwood Worldwilde Overwatch, Inc. (a division of Avalon Risk Management) Owner-Operator Independent Drivers Assoc.

Pak Shaheen Freighters (Pvt) Ltd. Patriot Contract Services, LLC Payless Car Rental System, Inc. Philadelphia Regional Port Authority PITT OHIO

Port of Port Arthur Portus Reckart Logistics, Inc. Royal Trucking Company Ryan’s Express Transportation Sea Box, Inc. Seabridge, Inc. Seatac Marine Services Secured Land Transport Semper Veritas Maritime Security Solutions SkyLink Air and Logistics Support (USA), Inc. SR International Logistics, Inc. Stratos Jet Charters, Inc. TechGuard Security Tennessee Steel Haulers Trailer Transit, Inc. Trans Global Logistics Europe GmbH TRI-STATE Expedited Service, Inc. Triton Systems, Inc. U.S. Bank Utley, Inc. Virginian Suites Arlington YRC Freight www.ndtahq.com | 27

Kent Gourdin

The Lunatic Express: Discovering the World . . . via Its Most Dangerous Buses, Boats, Trains, and Planes The Lunatic Express: Discovering the World . . . via Its Most Dangerous Buses, Boats, Trains, and Planes by Carl Hoffman, (Crown Publishing Group, 2011), ISBN13: 9780767929813, 304 pages, in hardback for $18.30, softback for $10.73, and Nook for $7.99.

S

carcely a day goes by without news of a transportation disaster somewhere in the world: Indonesian Ferry Sinks; Peruvian Bus Plunges Off Cliff; African Train Attacked by Mobs.

Whenever he picked up the newspaper, Carl Hoffman noticed those short news bulletins, which seemed about as far from the idea of tourism (travel as the pursuit of pleasure), as it was possible to get. So off he went, spending six months circumnavigating the globe on the world’s worst conveyances: the statistically most dangerous airlines, the most crowded and dangerous ferries, the slowest buses, and the most rickety trains. The Lunatic Express takes us into the heart of the world, to some of its most teeming cities and remotest locations: from Havana to Bogotá on the perilous Cuban Airway; Lima to the Amazon on crowded night

buses where the road is a washed-out track; across Indonesia and Bangladesh by overcrowded ferries that kill 1,000 passengers a year; onto commuter trains in Mumbai so crowded that dozens perish daily; across Afghanistan as the Taliban closes in, and, scariest of all, Los Angeles to Washington, DC, by Greyhound.

The Lunatic Express is the story of traveling with seatmates and deckmates who have left home without American Express cards on conveyances that don’t take Visa, and seldom take you anywhere you’d want to go. But it’s also the story of traveling as it used to be—a sometimes harrowing trial, of finding adventure in a modern, rapidly urbanizing world and the generosity of poor strangers, from ear cleaners to urban bus drivers to itinerant roughnecks, who make up most of the world’s population. More than just an adventure story, The Lunatic Express is a funny, harrowing and insightful look at the world as it is, a planet full of hundreds of millions of people, mostly poor, on the move and seeking their fortunes. A somewhat whimsical choice this month, but an interesting look at transportation nonetheless. DTJ

continued from page 25

of education and professional development, balances malicious, accidental, and natural disaster disruptions. The tools to better understand this balance must be generated through education and training through professional development of supply chain professionals who must prioritize different risks in the supply chain. Are we choosing technology solutions such as container security devices because we lack better understanding of strategic supply chain risk? Consider some of the main problems for supply chain leaders, as offered by Supply Chain Insights: 1. Reluctance to embrace new ways; 2. Lack of executive support regarding Supply Chain talent issues; 3. Difficulty attracting the right people.

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These devices may only be dealing with the tip of the iceberg. There are larger issues with potentially more vexing problems to industry. We may win the battle but lose the war if we are unable to better understand supply chain risk and prioritize the goal of finding the right tradeoff between efficiency and security. Education will help us move forward in the right direction. DTJ 1. Logistics Management, 2012 – “For supply chain managers, the average increase was up from $100,159 in 2010 to $128,335 in 2011.

2. Supply Chain Risk Management Consortium LinkedIn, Feb 2013 3. X-SCM, the New Science of X-Treme Supply Chain Management, Boyson, et al, University of Maryland, LMI and CSCMP, 2010 4. Supply Chain Talent: The Missing Link,”, Lora Cecere, Supply Chain Insights, 2012

june 2013

continued from page 7

ages (which combined will require an additional 239,000 additional drivers by 2022), and economic factors will cause a shortage in capacity. As capacity tightens, carriers’ costs will rise, meaning they must raise their rates to ensure DOD’s needed capacity, procured as a commodity on the commercial transportation market, is available.

7. Increases in Tolls and Fuel Taxes – The nation’s highway infrastructure continues to deteriorate. Congress has yet to reauthorize an adequate transportation bill to provide funding for the repair, maintenance, and construction of the nation’s highway infrastructure. Some states are requesting approval to increase the use of tolling, increase the toll prices, and add additional taxes to the price of fuel.

An examination of the remaining government FY 2013 budget, and projections of what to expect in FY 2014, would indicate those doing business with the government must adapt, adjust, be flexible, and seek opportunities in new or different areas. For the shipper requiring motor carrier transportation services, whether government or commercial, you should budget to pay more for surface transportation in government FY 2014 and CY 2014. DTJ

DTJ Index of Advertisers APL............................................................. C3 ARC .............................................................17 Bennett International Group.....................9 BNSF Railway............................................23 Boyle Transportation..................................6 Budget........................................................19 Farrell Lines.................................................1 FedEx.......................................................... C4 Landstar......................................................15 SAIC........................................................... C2 TOTE............................................................21 UPS................................................................2 Universal Truckload Services.................11

Steaming jungles, blazing deserts, frozen mountaintops. No matter where the dinner order comes from, we’re the reason MREs are never MIA. For more than 160 years, APL has been working to ensure our service men and women always have what they need to get the job done. Our unparalleled experience in ocean transportation and in-country logistics sets us apart from the competition. APL’s successful, long-standing relationship with the military proves that we have the resources and know-how to deliver when it counts. We won’t let you down, and more importantly, we won’t let down the troops who rely on the supply chain. We pride ourselves on being the mission critical link to success for our military yesterday and today, and we’ll be there for our troops tomorrow.

To learn more about how we serve those who serve, visit www.apl.com/usflag.

U.S. Flag Services

We’re not in the military, but we’re proud to serve the U.S. We take our job and yours very seriously. At FedEx, you can count on us for access to networks in more than 220 countries and territories and the flexibility to handle anything that comes your way. And you can trust that there’s pride in everything we do.

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