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A Publication of the Transportation Intermediaries Association March 2016

Logistics Journal

Transportation IntermediariesAssociation

Inside

Confusion Reigns Over Container Weight Enforcementby Will Sehestedt, Government Affairs Manager, TIA

The July 1, 2016, deadline to implement new international rules on shipping container weighing is rapidly approaching. As the date

marches closer, industry stakeholders including ship-pers, forwarders, third-party logistics companies, terminal operators, and ocean carriers are seeking clarity and guidance from the U.S. Coast Guard, the agency in charge of enforcement, on how to ensure that they comply with the new rules in the United States.

Updates on the U.S. Coast Guard’s websites, and statements in public meetings, have left much to be desired for the transportation community and U.S. shippers. In short, the extent of U.S. Coast Guard guidance to date has been to note the separation be-tween the responsibilities of international and do-mestic law. The container weighing regulation was adopted by the International Maritime Organization

(IMO) as an amendment to the International Con-vention for Safety of Life at Sea (SOLAS treaty). While the United States is a signatory to the SOLAS treaty, the Coast Guard maintains that the international ac-cord does not grant them the domestic authority to regulate shippers or domestic business entities in the United States, or to regulate ships that are flagged by countries other than the United States. Further, the Coast Guard does not intend to pursue any agency rulemakings that could expand its authority to regu-late container weights.

The end result of this Coast Guard interpreta-tion and inaction on the regulatory front means that industry will likely be required to shoulder the burdens of implementing the rules of the treaty. Be-ginning July 1, questions remain between industry stakeholders about serious issues under the contain-er weighing rule, such as:

of containers acceptable for use in determining verified gross mass (VGM)?

-haps 5 percent, to accommodate differences in equipment calibration?

-

Continued on page 3

Understanding Spot Market Pressure . . . . . . . . . . . . . . . 4

Out of Control: The Quandary of the Statutory Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Linear Incentives—The Bedrock of Solid Plan Designs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

TransCredit’s Freight Payment Index . . . . . . . . . . . . . . . 15

Why Do Smart People Fail? . . . . . . . . . . . . . . . . . . . . . . 21

How to Be a Freight Broker Sales Call Rock Star . . . . . . 22

Artificial Intelligence Comes to Brokerage . . . . . . . . . . . 27

Calendar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

DAT North American Freight Index. . . . . . . . . . . . . . . . . 29

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Transportation Intermediaries Association 3 The Logistics Journal

lowing containers onto their property even if the container does not have a VGM?

-minal property, who bears the responsibility for obtaining a VGM and to what facilities can they take the container to determine the VGM?

for transmitting VGM data, and the timelines for submitting that data, be standardized?

The lack of a proactive approach from the Coast Guard differs from other regulatory agencies world-wide. Japanese authorities have released draft guid-ance for shippers which anticipates an enforcement threshold of within 2-5 percent of the listed VGM for a container, and which would fine shippers who fail to provide a VGM for a container or who pro-vide inaccurate VGM for a container up to 300,000 yen ($2,500) for each violation. In Canada, Trans-port Canada will likely waive penalties for the first months as the industry adjusts to the new rule, and will also likely allow for up to a 5 percent variance between VGM and inspected container weight.

The Basics of the New RuleThe basic principle of the new container weighing rule is that no shipping containers can be loaded onto cargo ships for export without a VGM that has been supplied to the ocean carrier in time to be used in load planning. This weight may be determined in two different ways:1) Verifying the mass of each item packed into the

container, including packaging, verifying the weight of the container itself, and then adding the two weights together, or

2) Verifying the mass of the loaded container as a whole.

For third party logistics providers, the responsi-bility (and necessity!) of obtaining a VGM must be communicated to their shipper customers. Estimated weights will not be permitted, and the company who appears as a shipper on the bill of lading must pro-vide the weight of the packed container. If the third party is acting as a freight forwarder or consolidator, it may not rely on the weight supplied to them by another party except for “individual, original sealed packages that have the accurate mass of the pack-ages and cargo items (including any other material such as packing material and refrigerants inside the packages) clearly and permanently marked on their surfaces do not need to be weighed again when they are packed into the container.” (IMO Guidelines, paragraph 5.1.2.1)

These requirements will be specific to packed export containers which are to be loaded onto any ship in international maritime traffic, with limited exceptions. The rules will not apply to containers on chassis or trailers which are driven on a ro-ro ship for short international voyages, or to cargo items ten-dered by a shipper to the master for packing into a container already onboard a ship.

Steps ForwardBecause of the potential risk of having containers go unloaded, and as a result of the lack of clear guid-ance on enforcement from the Coast Guard, it is im-perative that companies protect themselves by ensur-ing that they have access to facilities to weigh their cargo and containers in a timely manner, and that they communicate with their ocean carriers regard-ing how to best share VGM documentation.

To prepare industry for the July 1, 2016, imple-mentation deadline, the World Shipping Council first published an Industry FAQs document in December 2015. A .pdf copy of this guidance is available on the front page of the TIA website, www.tianet.org. On the heels of that publication, trade groups, shippers, and carriers worldwide have worked closely with each other and with enforcement entities worldwide to rush towards compliance. As additional informa-tion is distributed by ocean carriers, terminal opera-tors, regulatory authorities, and other industry part-ners, TIA will be sure to share that information with all members.

TIA is the North American representative to FIATA, the International Federation of Freight Forwarders, and tracks issues such as this container weighing rule through its International Logistics Conference. For more information on this rule, or if you have additional questions or concerns, please contact Will Sehestedt at [email protected] or 703-299-5713.

Confusion Reigns Over Container Weight EnforcementContinued from page 1

For third party logistics providers, the responsibility (and necessity!)

of obtaining a VGM must be communicated to their shipper

customers.


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March 2016 4 The Logistics Journal

by Roxanne Bullard, Director of Research, Truckstop.com

Ignoring the spot market can be a costly business decision. Spot market transactions make up nearly a third of all truckload transactions and provide

a good pulse indicator of the entire market. Under-standing spot market freight movement and pressure can lead to quicker business decisions when negotiat-ing rates, onboarding carriers, and tendering loads.

With the recent partnership of Truckstop.com’s data and FTR’s analysis, understanding spot market pressure has become easier. The Market Demand In-dex (MDI), measures spot market pressure by provid-ing a look at supply vs. demand or available freight vs. available capacity on a weekly basis with insight into historical trending and near-term forecasting. When the MDI rises, capacity is getting tighter and the market proves to be in favor of the carrier. As the MDI drops, the capacity loosens and the market proves to be in favor of the broker.

Market favorability holds true in regards to rates as well. FTR, by taking into account seasonality, eco-nomic trends, and other market conditions, deter-mined parameters for an ‘even market’, a market in which both brokers and carriers tend to be on a more level playing field. When conditions fit this environ-ment rates could move either up or down but are un-likely to move significantly. The ‘even market’, as de-termined by FTR, shifts over time as the proportion of shippers/brokers in the spot market fluctuates.

Total MDI represents all spot market truckload transactions. When Total MDI falls between the lev-els of 15 and 20, this is considered an ‘even market’.

Total MDI

The Total MDI has slowly risen in recent weeks. FTR forecasts that rise to continue for the next couple of weeks.

But not all markets are created equal. As we look at different equipment segments (Van, Flat, and Reef-er), the volatility proves to be different for each. An additional step was taken by FTR to define the pa-rameters of the ‘even market’ for each segment.

Van MDI

Above 15 = Carriers’ Market / Below 12 = Shipper/Brokers’ Market

Flatbed MDI


Reefer MDI


“The market is in a period of relative stability although it is at a lower level of demand then we have seen over the last few years,” says FTR’s Jona-than Starks. “This has certainly put downward pres-sure on pricing in the spot market, plus when you combine that with the lower fuel price environment that we are now in we have all-in rates that are sig-nificantly below what we were seeing just two years ago. To start 2016, the Total MDI has been sitting just below its five-year average. We expect to see it mov-ing up over the next few weeks, but this is merely the normal seasonal increase in demand - not a change in overall conditions.”

The millions of data points collected by Truck-stop.com, combined with FTR’s analysis, helps turn big data into actionable business intelligence. Better understanding of spot market pressure provides an opportunity to benchmark your company’s perfor-mance with the entire market and improve your bot-tom line.

For more information please contact Roxanne Bullard, Director of Research, Truckstop.com, at [email protected].

Understanding Spot Market Pressure


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Continued on page 9

Benesch Friedlander Coplan & Aronoff LLP

Continuing the saga of being held respon-sible as a statutory employer for the acts of a subcontractor’s employee driver, the South

Carolina Supreme Court recently upheld a decision to hold another motor carrier liable for a workers’ compensation claim when a subcontractor’s expe-dited delivery service driver was fatally injured while returning from a contracted load. The subcontractor did not have adequate workers’ compensation insur-ance; therefore, the upstream motor carrier was held liable regardless of the fact it exercised no control over the employee once the delivery in Wisconsin had occurred.

In Collins v. Seko Charlotte (Op. No. 27519, Apr. 29, 2015), Gregory Collins was a driver for West Ex-pedited & Delivery Service, Inc. (West Expedited), which as a subcontractor, contracted with Seko Char-lotte to deliver certain goods in interstate transporta-tion. On his way back to South Carolina, after com-pleting a delivery in Wisconsin for Seko Charlotte, by way of West Expedited, Collins was involved in a fatal collision. Seko Charlotte and West Expedited were both in the cargo delivery business, but Seko Charlotte engaged in business with West Expedited roughly two or three times a month for transport-ing parts. Although there was no written contract for this shipment, Seko Charlotte and West Expedited followed West Expedited’s custom of having Seko Charlotte pay for mileage one way, but West Expe-dited included the cost of the return trip in the mile-age rate. After the fatal incident, Collins’ dependents filed a workers’ compensation claim against West Ex-pedited, but West Expedited did not carry workers’ compensation insurance at the time of Collins’fatal accident. Accordingly, Collins’ dependents also filed a similar claim against Seko Charlotte, Seko World-wide, and its insurance company.

The case was originally heard by the Workers’ Compensation Commission where the commissioner applied the Voss v. Ramco, Inc., 482 S.E.2d 582 (Ct. App. 1997) three-part test to determine whether Collins was Seko Charlotte’s statutory employee at the time of his death. The three-part test requires the court to consider “whether (1) the activity of the sub-contractor is an important part of the owner’s trade or business; (2) the activity performed by the sub-contractor is a necessary, essential, and integral part of the owner’s business; or (3) the identical activity per-

formed by the subcontractor has been performed byemployees of the owner.” Id. at 586 (emphasis added). The Workers’ Compensation Commission applied the three Voss factors and determined that Collins was a statutory employee. Therefore, Seko Charlotte was found liable.

Seko Charlotte appealed the order and the appeal was heard by the Appellate Panel of the Commission. The Appellate Panel applied the employee/indepen-dent contractor test’s four factors and concluded Col-lins was not an employee of Seko Charlotte on the return trip because West Expedited had “exclusive right of control over [Collins]” after the deliveries were made in Wisconsin. The Appellate Panel re-versed the decision. Next, the case was appealed to the Court of Appeals, where the Court found that the Appellate Panel of the Commission had erred when it applied the employee/independent contractor test instead of the statutory employee test. Therefore, the Court of Appeals concluded that Collins was a Seko Charlotte statutory employee. The South Carolina Supreme Court granted the petition for a writ of cer-tiorari to review the decision.

Seko Charlotte argued the Court of Appeals erred in holding Collins was a statutory employee at the time of the accident because the contract be-tween West Expedited and Seko Charlotte terminat-ed when the delivery was made in Wisconsin. On the contrary, the Uninsured Employers Fund (Fund), brought into the case because West Expedited lacked workers’ compensation at the time of Collins’ fatal accident, claimed that the return trip was “neces-sarily incidental to [Collins’] statutory employment with Seko.” Additionally, the Fund claimed that Col-lins was a “traveling employee,” and did not meet the exception to the rule because he “did not deviate from the most direct route to return him to South Carolina.”

The South Carolina Supreme Court found that the Court of Appeals was correct in concluding that

Out of Control: The Quandary of the Statutory Employer

The court found that the contract between two parties only provides a

“necessary foundation for the creation of the statutory employee relationship.”


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the statutory employee test should be applied. Seko Charlotte conceded that Collins was a statutory em-ployee on the trip to Wisconsin. The issue then be-came whether Collins’ status as a statutory employ-ee changed once the delivery was made. The court found that the contract between two parties only pro-vides a “necessary foundation for the creation of the statutory employee relationship.” However, once the statutory employee status attaches, the extent of the status is determined not by the contract itself, but by the nature of the work contracted to be performed. Here, the nature of the work for Seko Charlotte’s di-rect employees was the same as that performed by Collins. Collins was providing an “express hot de-livery” service from South Carolina to Wisconsin, which in the industry is known as an immediate and direct trip where it is unlikely that a driver will have cargo on the return trip. In this situation, Seko Char-lotte frequently used West Expedited’s services, this trip was to solely transport Seko Charlotte’s load and West Expedited typically would not pick up another customers’ loads for the return trip to South Caro-lina. The court also determined that the nature of the work required immediate travel to Wisconsin and an expected return trip to South Carolina. Furthermore, Collins’ work for Seko Charlotte did not end until he returned to South Carolina.

Finally, the court found that the three-part Voss test further supported Seko Charlotte’s status as a statutory employer, noting that Seko Charlotte is: (1) in the cargo delivery business; (2) interstate deliveries are necessary and integral part of its business; and (3) its drivers made similar de-liveries as Collins. Additionally, South Carolina Code states, “the owner shall be liable to pay for any work-man employed in the work any compensation under this title which he would have been liable to pay if the workman had been immediately employed by him.” Since Seko Charlotte covered its own employee driv-ers on their return trips, Collins was entitled to the same coverage as Seko Charlotte’s employees.

As we have advised freight brokers, following the Atiapo v. Goree Logistics, Inc., 770 S.E.2d 684 (N.C. Ct. App. 2015) opinion, to minimize their potential exposure to liability for payment of work-ers compensation damages to drivers of the motor carriers with which they contract, upstream motor carriers should contractually require that the down-stream motor carriers with which they contract to obtain workers’ compensation insurance and related benefits for their drivers. Additionally, upstream mo-tor carriers should require the downstream motor

carriers to have their insurance broker or carrier pro-vide certificates verifying the motor carriers’ work-ers’ compensation coverage. Furthermore, upstream motor carriers should ensure they have their own “all states” workers’ compensation and employer liability policy in place that will cover their own employees, or depending on the state requirements, an occupa-tional accident policy.

Even if a motor carrier is only paying insurance premiums for its own employees, and not any of its or the downstream carrier’s independent contractor owner-operators, in the event that a driver is subse-quently found to have been a misclassified worker, the driver’s injuries would still presumably be cov-ered by the upstream motor carrier’s workers’ com-pensation policy. While an insurance carrier could subsequently require the payment of additional pre-miums, following a workers’ compensation claim and insurance audit, the “AP Audit Risk” could end up being well worth the upstream motor carrier’s ex-pense in obtaining a workers’ compensation policy to limit its exposure to the type of liability imposed in the Collins and Atiapo cases.

For more information on this article, please contact Stephanie S. Penninger at [email protected] or (317) 685-6188, or Brittany L. Shaw at [email protected] or (317) 685-6118.

Out of Control: The Quandary of the Statutory EmployerContinued from page 6

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by Beth Carroll, Managing Principal, Prosperio Group

So far we have looked at commissions, matri-ces, bounties, and tiered incentives. I have saved the most common plan design mechan-

ic for last. For anyone who has ever worked under a corporate bonus plan, this should look familiar to you. It is called a linear incentive because… well… it creates a line.

Generally speaking, linear incentives are used with goal-based incentives paying a fixed dollar or percent of salary payout (as opposed to commis-sions). We showed you how you can combine goals and commissions in a preceding article and certainly this method creates lines also (recall the different lines drawn when using a retroactive commission—it looks like stairs, a straight commission—straight line up from the bottom left corner of the grid to the upper right corner of grid, and a marginal commis-sion—a nice curve that drives more pay to the top performers with less pay to the bottom performers). A linear incentive works a lot like the marginal com-mission, but it gives you even more control over the goals and the outcomes than a commission does—because you are setting both the goal and the pay-out.

The most common (and incorrect) form goes something like this: at 80 percent of goal you are paid 80 percent of your target incentive, at 100 percent of goal you are paid 100 percent of your target incen-tive, and at 120 percent of goal you are paid 120 per-cent of your target incentive. Not only is this boring, it overpays your bottom performers and underpays your top performers. For most organizations, 80 per-cent of goal attainment likely represents shrinkage over the prior year; if the growth goal is anything less than 25 percent you are going backward when you only reach 80 percent of the new goal:

Last year’s results: $1,000,00025 percent growth goal: $1,250,00080 percent of new goal: $1,000,000

If your growth goal is 10 percent, then the new goal is $1,100,000 and 80 percent of that is $880,000 or a loss of $120,000. Are you really going to pay someone 80 percent of their incentive for go-ing backward? For this reason, you are more likely to want to pay maybe 25 percent of the target incen-tive (or maybe you set the threshold at 90 percent of goal and pay 25 percent of the target incentive there). Then at 100 percent of goal, you would cer-

tainly pay 100 percent of the incentive. When we get above goal a different question comes into play. If we take our first example, someone who exceeded the $1,250,000 by 20 percent achieved $1,500,000 or 50 percent growth over prior year. This achievement is probably worth more than simply a 20 percent in-centive premium.

For the upper end of performance, in order to figure out the right inflection point and amount of pay at that point you need to look at two things:1) What performance is attained by your top tenth

percentile rep? Use a bit of Excel magic to figure this out. Look at your column of results that shows percent of goal attained and use =percen-tile (Array,.90) where array = the column that has all the percent of goal results. This will give you the percent of goal attained by your 90th per-centile performer (the person who is #10 in a list of 100 ranked highest to lowest). This is a good place to set the inflection point. Let us say our analysis revealed this is 120 percent of goal.

2) Look at your pay mix (we decided this a LONG time ago). The more pay at risk the more upside you should have for those who do well under the plan. If you are using an 80/20 or 75/25 pay mix, a 2x upside is probably fine. If you are more vari-able (more pay at risk) than 75/25 you probably should use a 2.5x or even 3x leverage. When you get in the zone of 60/40 or 50/50 you certainly should be using 3x leverage. Let us say for this plan we are using 2x leverage (200 percent of target incentive).

Now we put 1 and 2 together and we know that at 120 percent of goal we should be paying 200 per-cent of the target incentive. We now have the three key points we need to define the slope of our payout curve (I know, I know—it’s not really a curve—it’s a series of lines, but that’s what it’s called).

At 80 percent of goal we are going to pay 25 per-cent of the target incentive, at 100 percent of goal we pay 100 percent of target incentive and at 120 per-cent of goal we are going to pay 200 percent of the target incentive. Now…go way back in your memory to high school algebra. You are going to use Y = MX + B, or the slope of the line formula, but do not freak out. It is not nearly as scary as it sounds, and all you really need to know is “Change in Y over Change in X.” The X axis is performance, the Y axis is pay. So let us figure the slope on the first part of the line. Change in Y (100 percent of pay minus 25 percent of

Linear Incentives—The Bedrock of Solid Plan Designs


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pay) over change in X (100 percent of goal minus 80 percent of goal):

(100 – 25) / (100 – 80)75 / 20 = 3.75

This means, for every 1 percent of goal earned between 80 percent of goal and 100 percent of goal, an additional 3.75 percent of the target incentive is earned. So at 81 percent of goal the payout is 25 per-cent + 3.75 percent or 28.375 percent. This contin-ues to 100 percent.

Now at 100 percent something happens. The slope of the line changes. We now have change in Y (200 percent of target incentive minus 100 percent of target incentive) over change in X (120 percent of goal minus 100 percent of goal).

(200 – 100) / (120 – 100)100 / 20 = 5

This means for every 1 percent of goal above 100 percent an additional 5 percent of target incentive is earned. So 101 percent of goal pays 100 percent + 5 percent or 105 percent, 102 percent of goal pays 110 percent etc. all the way to 120 percent of goal. The example below shows how the lines would look if you had a 50 percent to 150 percent performance range, and paid 25 percent at threshold (50 percent of goal) and 250 percent at excellence (150 percent of goal). Check the math and see if you can use dif-ferent inflection points and payout values to derive different slopes.

Ok, so now you understand HOW it works, but what about WHY? When would you use a wide per-formance range (50 percent to 150 percent) vs a nar-row performance range (80 percent to 120 percent) and do the sides always have to be symmetrical (e.g., 50 percent above and below 100 percent or 20 per-cent above and below)? Part of the answer is math-ematical, part is economical, part is psychological, and part is determined by your crystal ball.

First, the mathematical answers. Lower level employees typically have wider performance ranges than their team leaders and managers who are man-aging toward an aggregate goal. This is due to some-thing called the “Law of Large Numbers” (sometimes mistakenly called the “Law of Averages”). Basically, this means that for any individual, the probability of an outcome of 50 percent of goal or 150 percent of goal is about the same. But if we take 10 of these people and add their results together, the probability now that the overall result of the team will be 50 percent of goal (in total) or 150 percent of goal (in total) diminishes as there is likelihood that some of the people will be above goal and some will be below goal… so the highs and the lows will “average each other out” and the overall team result will be closer to the center. At each level of aggregation, you would get closer and closer to a center point. This means the odds of a manager or division or company being far from the center are smaller, so you use a tighter

Continued on page 15


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performance range at each level of aggregation.Second, the economic reasons. How much can

you afford to pay at what level of performance? If you are replacing a straight commission paying from the first dollar, you can probably afford to have a very low threshold (as that is what you have had so far). If you are adding incentive on top of salary for the first time, you may want to set a high threshold to en-sure you are really gaining results for the additional dollars you are paying. Also, consider the costs on the upside. If you pay 200 percent of the incentive at 120 percent of goal, will the 20 percent gained “cover” the additional 100 percent in incentive pay? Remember to convert revenue to profit if you are us-ing revenue as the goal. You will likely be paying out a large percentage of the gain in compensation, but remember once you are above 100 percent of goal (if you have set your goals right) then you should have covered all your fixed costs and any additional profit will drop straight to the bottom line. You can AF-FORD to pay more of it, and in fact it is worth it to pay more of it to encourage employees to get to that zone. It is better for you and it is better for them.

Third, the psychological reasons. I have gone toe to toe with many a CFO over the need to pay anything below goal. In this case, the CFOs were espousing the “bonus” philosophy where incentive payments are only extra, or above and beyond, if goal is attained. While I get the economics of this philosophy, you have hampered the motivational val-ue of your incentive plan if you take this approach.

Good goal setting should result in a bell curve of per-formance with 50 percent - 60 percent of people at or above goal. This means 40 percent to 50 percent of people are below goal. Let us assume you have 100 people and each has $1m revenue goal. If 40 of them increase their performance by 5 percent that is an additional $2m in revenue ($50k x 40 people = $2m or 2 percent over your overall goal). Check the math on the additional compensation cost to pay them for moving up 5 percent points, but I bet you that you will see it is worth it (remember to convert revenue to profit!). If you make it so they have to get all the way to 100 percent of goal before payout, you will discourage nearly half of your population as they may feel it is “too far” to get to 100 percent, but they might be able to get to 90 percent.

Finally, how good is your goal setting? Are you 100 percent accurate in your future predictions of what is possible and of what the economy will do? Probably not. To allow for some margin of error, you should have a range around goal that allows for un-expected benefits or challenges. These can happen to any individual or to an entire company or indus-try. Providing a range gives your employees cushion on the downside, and you a bit of protection on the upside. Think of it this way….would you pay 200 percent of target incentive for 101 percent of goal? Probably not. So why would you pay 0 percent for 99 percent of goal?

From a practical standpoint, we commonly see 50-150 ranges or 70-130 ranges used for individual contributor roles and individual performance met-rics. Likewise, we see 75-125 or 80-120 ranges for

Linear Incentives—The Bedrock of Solid Plan DesignsContinued from page 12

* TIA Non TIA Shippers

’16Jan. 96 – 34 94 – 34 72 – 41Feb. 96 – 34 94 – 34 71 – 41’15Mar. 98 – 30 95– 33 79 – 37Apr. 98 – 29 95– 33 79 – 37May 98 – 29 95 – 33 79 – 38Jun. 98 – 30 95 – 33 80 – 37July 98 – 29 95 – 32 79 – 37Aug. 98 – 29 95 – 32 80 – 37Sept. 96 – 34 94 – 33 71 – 38Oct. 96 – 34 94 – 33 71– 38

Nov. 96 – 34 94 – 34 71 – 41Dec 96 – 34 94 – 33 71 – 41

* TIA = Composite ratings of TIA MembershipNon TIA = Ratings of over 8,500 Non Member IntermediariesShippers = Ratings of over 312,000 truck-load shippers

Since 1987, TransCredit has produced credit reports exclusive to the trucking industry. Compiling data on how freight bills are paid, they offer a widely accepted Credit Score and Days-To-PayTM trends that are posted on most load boards throughout the USA and Canada.

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team metrics or team leader/manager goals. 90-110 ranges may be used for very high level company goals. But, this begs one of our earlier questions. Do the ranges have to be symmetrical? No. Not at all. In high growth situations (where the risk of back-sliding is small and the risk of far exceeding goal is high) we may recommend a 90-150 range. Or, if you are putting someone into a turn-around situa-tion with high possibility of struggle and failure, a 50-110 range may make sense. It all depends on the circumstances. Typically very large goals (such as for National Account Managers) have tighter ranges than very small goals. It is typically harder to achieve 120 percent growth on a $10m goal than it is to achieve 120 percent of a $1m goal.

But what happens above excellence? Again, sor-ry, it depends. If you are paying an individual for in-dividual financial results, think long and hard before you cap the payout. Instead, consider a reduced slope or a soft cap. In our 80-120 example above, the rate of change from 100 percent to 120 percent of goal was 5 percent of target incentive (5:1). In a soft-cap, we would cut the slope in half, so that any percent of goal above 120 percent is now worth 2.5 percent of target incentive (half of the 5 percent it was previ-

ously worth). This keeps the plan uncapped but puts protections in place for management in case of wind-falls or flubbed goal setting. Note that you can also use a “deal cap” vs an overall cap. A deal cap limits the amount of credit that can be applied to goal from any single deal. This is often phrased as a percent of goal/quota (i.e., the maximum goal credit from any single deal will be 50 percent of the annual quota). This usually only comes into play for elephant hunter type roles that are doing large, multi-year TM or 3PL contacts, but it is worth remembering that it exists as an alternative to an overall cap.

If on the other hand, the element in question is non-financial or team based, then it probably should be capped. Otherwise, you run the risk of paying out an entire team for one person’s good fortune, or you may overpay the value of the result gained if the mea-sure is strategic with an imprecise link to financial results (such as new carriers or customers).

Beth Carroll is the owner of Prosperio Group, a consult-ing firm which helps companies maximize profitability by clarifying business objectives, rationalizing organi-zation structures and roles, and driving performance through effective compensation. Beth is a member of the TIA Foundation Board and manages the TIA Com-pensation Survey: Measure-Up. The author can be reached by email at [email protected]

Linear Incentives—The Bedrock of Solid Plan DesignsContinued from page 15


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By Norris Beren, Chief Executive Advisor, Author, Risk Reward Consulting, Inc.

People, especially business leaders, who obsess over goals or demonstrate obsessive behav-iors need to avoid making choices that reject

good sense—even if they drive great results. Obses-sive thinking and behavior can be a good thing in personal life and in business if managed correctly. However, when they drive people away or create a culture steeped in “my way or the highway” think-ing, that will kill motivation, enthusiasm, and any great results achieved will be only short term.

It appears that business leaders around the world are finally getting the message—they can no longer continue with their obsession over short-term profits growth at the expense of a healthy society. (Survey by Price Waterhouse of 1400 chief executives—Huff-ington Post by Jo Confino 1/20/2016).

As outlined in an article appearing in Business Insider, the CEO of one of the largest fast food chains had a misguided obsession with a competitor that could drive his business into the ground. He is tar-geting any customer by stealing market share from the competition and other chains instead of focus-ing on his core customer base. Thus, the business suffered financial losses for several years. The new CEO of a major internet search engine provider is described as “absurd in her obsession with details.” The co-founder of another search engine provider is described as “obsessed with efficiency and possess-ing tunnel vision.”

In each of these instances described above, the CEOs ultimately were successful in varying degrees by turning their companies in the right direction and getting back to profitability but at what price with their stakeholders, customers, employees, Wall Street, and the court of public opinion?

What do top logistics companies have in com-mon? “Shrewd and experienced management teams and an obsession with service and operational de-tails.” (Logistics Management, John D. Schultz, April 2011)

This obsessive behavior makes total sense when it provides high levels of customer satisfaction and expectations. Making the right choices and imposing high standards in transportation and logistics compa-nies’ operations may be obsessive, but stakeholders understand and support the results. It does not work

when obsession without reason or following good business principles dominates the CEO’s thinking.

Are you obsessive? Are you managing your pas-sions correctly or are you obsessed with whatever is important to you at the expense of good results, re-specting your workforce, or being a good leader?

If you know you have an obsessive desire to achieve specific outcomes and recognize that you need to tone it down, then maybe change is possible and necessary.

Want to change? Consider whether these statements apply to you:

delegate

reason to do so

others

A good example is the small trucking company owner in the Midwest who was obsessed with buy-ing a piece of land and building his own truck ter-minal rather than continuing to rent. Economically it probably made sense, however, the company was struggling to become profitable. The CEO’s banker discouraged the project, preferring to postpone it for a year or two. Then came the economic meltdown of 2007 and the business came very close to collapsing. It was essentially bankrupt but the owner refused to back off his fixation on the building that had to be built.

The banker terminated his business relationship for fear of the company closing; the owner refused to stop the project and had to resort to some very ex-pensive sources of capital to keep afloat. It took five years, enormous anxiety and stress to get right side up financially. This was an obsession on steroids.

How can an obsession be useful without over-whelming positive behaviors while still allowing for a success path?

Learn to manage your obsessions and passions—be confident, but do not be a narcissist—self-centered (instead of success-centered), singularly focused, in-flexible, and reckless. Leaders who are humble and who focus on others are more successful and capture the cooperation and passion of their subordinates.

Stop believing that you are “special” and no one else can do what needs to be done.

Why Do Smart People Fail?Reduce Your Risks of Business FailureAvoid Obsessive Choices or BehaviorsPart 3 of 7


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super sensitive to constructive comments about your behaviors, passion, or unwillingness to compromise

unlimited success at the expense of alienating others around you

admire you

Managing Your Obsessions for Better Interper-sonal Relationships and Results

Being obsessive can have advantages if controlled and if you truly care about results and those that help you achieve them.

Discard your obsessions in place of maintaining a passion for what you believe in and who you are—but make it work for you and not against others.

make it real; do not disguise your obsessive per-sonality only to have it surface later

-propriate

-tence

Consider that in business even achievement can become—in and of itself—an obsession. You can be obsessed for the right reason and right outcome. But when it is a blind obsession, it will lead you to nega-tive outcomes. The true test of an obsession that will

not result in a positive outcome is the notion that you cannot argue with an obsession—it is there and will appear non-negotiable.

Things to Think About

Obsession does not always rule.-

tion, decisions or actions and question them. Do not move ahead for the wrong reasons and do not rationalize your decisions based on illogical thinking.

your thought process and goal setting—make it a team effort.

Do you consider yourself a great leader of people and a good CEO of your business, your department, your job? Take the Self-Scoring Seven Habits Profile Quiz and find out.

For more information and a free sample of the Profile Quiz, contact me at [email protected] or on LinkedIn at http://www.linkedin.com/in.norrisberen

Norris Beren, author of Why Do Smart People Failfrom which this article is based, is the CEO of Risk Reward Consulting, Inc. located in Mt Prospect, Illinois. He provides executive advisory services to transporta-tion and logistics CEOs and their executive teams to get out of “struck” and become top performing companies. He uses a “different lens” analysis of legacy thinking in-cluding advanced strategies on retention and recruiting.

How to Be a Freight Broker Sales Call Rock Star by Lisa Czapla, Marketing Manager, Logistic Dynamics, Inc.

When we are about to venture into new terri-tory, we all wish we knew the right way to proceed or a roadmap that led us to a desti-

nation of success. In reality, it is never that easy. If you are starting out in the freight sales profession, calling on a prospect is not only a priority—it is a necessity to establish and grow your freight broker business. And as a freight broker, you know that making effec-tive sales calls is the difference between success and failure. You also know it is not about getting pros-pects to just come on board. It is about keeping them actively shipping with you, while offering them great service and the best prices.

So, would it not be great to know the freight bro-ker’s secret to making a top class sales call? While it may seem simple, it most certainly is not easy. You will have to persevere through rejection and work

hard day after day, bouncing back from the challeng-es of calling prospects. As once homeless then turned professional football player in the NFL and now mo-tivational speaker, Eric Thomas says, “All roads that lead to success have to pass through Hard Work Bou-levard at some point.”

85 Percent of Your Financial SuccessResearch carried out by the Carnegie Institute of Technology shows that 85 percent of your financial success is due to your personality and your ability to lead, communicate and negotiate. Believe it or not, only 15 percent comes from technical knowledge. This is exactly the opposite of what the world tells you. We are told that the path to take is to go to school, get a degree and get the knowledge. Unfor-tunately, this only accounts for 15 percent of suc-cess! What the world does not teach you is the other



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85 percent—how to communicate, negotiate and lead. We are left to figure all that out by ourselves.

What You MUST Do When Making a Sales CallEarning a prospect’s business by making them feel special and not just being the next name on a long list of sales prospects is the key to being a successful freight broker agent. You need to take the time to learn a bit about your prospect’s business and back-ground, be well prepared before the call, and alwaysoperate under the conviction that freight broker rock stars consistently do what average freight agents do not or will not.

Sales Call Information SheetTo have a no-fail sales call, you need a no-fail sales call information sheet. A good habit to get into, is having a sales call information sheet that includes these important key details about the company/con-tact with whom you will be connecting:

Why is this information so important to know, you ask? The answer is simple: because it is these key details that will help you later construct a no-fail sales call script. And yes, it is a given that informa-tion gathering is hard work but it will ALL be worth it when you plug your information into your sales call script and become a top-producing, rock star freight broker. Here is a great template to go by to help you create your no-fail sales call script:

Sales Call Script

manager?__________________________________________

with _____________________________ (Pause)_____________

of _______________________________ (Pause)

NOTE: A referral ALWAYS works best when first con-tacting a Customer!

I will be really QUICK with just a couple of questions about your Shipping needs.1. I see that you manufacture / Warehouse / Ship /

Sell __________________2. Do you or your customers oversee the freight?

Inbound & outbound?3. Do you ever have to look for additional trucks on

your own?4. Do you keep your options open to additional car-

riers, at least to see how our prices compare with theirs?

5. May I email you some information?6. What is your email address?

After getting their email address, finish the call with this final question below:

Do you have any freight you are working on today or this week that you need help with?

It may sound basic but, in the freight broker business, perfecting your sales calls is the most im-portant thing you will do in this profession. When you treat this part of your job with the importance it deserves, invest the amount of time that is necessary to obtain the information you need AND combine it with this no-fail sales information sheet and no-fail sales call script, you will possess the weapons you need in your freight broker arsenal that will propel you and your freight broker business to accomplish what you had only ever dreamed of achieving!

If you have questions about this report visit www.Logis-ticDynamics.com or call us today at 1-800-554-3734. The author may also be reached by e-mail at [email protected].

The Logistics Journal Copyright Rules:Transportation Intermediaries Association, Inc. (“TIA”), and the authors of the articles published therein, are the owners of copy-rights in and to The Logistics Journal and its content. Author(s) of articles and/or content submitted for consideration for publication in The Logistics Journal grant to TIA, and TIA reserves the rights to edit, revise, abridge, reproduce, display, perform, and make trans-lations, anthologies, compilations and other works derived from all content published in The Logistics Journal, and to republish and distribute all of the same, in any and all media of expression now known or hereafter devised (including, without limitation electronic and Internet publication), throughout the world, royalty-free, in perpetuity. TIA shall have the rights to use authors’ name(s) and/or likeness(es) in The Logistics Journal and in connection with pro-moting and publicizing The Logistics Journal and the activities of TIA. Articles included in The Logistics Journal may be reproduced in their entirety by others, subject to the approval of the article/content’s author(s). In addition to the approval of the article’s author(s), all articles run in The Logistics Journal reproduced by others must be properly attributed to The Logistics Journal, include the issue year and month in which it was published, and must bear the notice “The Logistics Journal — © 2016 Transpor-tation Intermediaries Association, Inc.”

How to Be a Freight Broker Sales Call Rock StarContinued from page 22


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By Matt Bernstein, CEO, Hubtran Inc.

Artificial intelligence is about to transform per-haps the grittiest part of the brokerage busi-ness—the back office.

Today, most brokers do not realize how costly their back office really is. As a broker, chances are that you are rightfully proud of your team and the shortcuts implemented. These workarounds do in fact create efficiencies… within an incredibly inef-ficient environment. In contrast, some of the largest brokers in the industry are now working to automate the back office, with an understanding that unneces-sary cost has now become absolutely fatal.

Payables is a typical back office process with special procedures unique to each brokerage. A list of the individual steps for managing payables can fill an entire page, single spaced. Teams keep track of all this work only through long experience and individual heroics. And the whole process becomes exponentially more error prone and costly with any kind exception—a missing POD (Proof of Delivery), a misplaced invoice, an invoice amount that does not match the carrier charge in the TMS (Transportation Management System), a payment address that does not get updated... You get the idea.

This is a tough problem to solve because of the sheer number of players in trucking: millions of ship-pers, hundreds of thousands of trucking companies, over 10,000 brokers, and hundreds of factoring com-panies. All with their own requirements and custom documents. Not to mention stuff like scale tickets, lumper receipts, or gate passes which originate from a completely different set of companies.

Some 3PLs deal with this by having their carriers send invoices by EDI (Electronic Data Interchange). But EDI is expensive and does nothing for brokers who require PODs and assessorial documentation. Other brokers purchase document management sys-tems, which help store and retrieve documents. But they do not address the most significant problems: manual validation, manual key-stroking, and manual exception resolution.

Now artificial intelligence does.Just a bit of background: Companies like Face-

book have developed photo-reading systems based on what is called deep learning, a technique that identifies faces and objects in photos on the social network. Using interconnected machines that ap-proximate the web of neurons in the human brain,

Facebook learns to identify photos by analyzing enormous numbers of similar images. To identify your face, for instance, it feeds all known pictures of you into the neural network, and over time, the system develops a good idea of what you look like. This is how Facebook seems to recognize you and your friends when you upload a photo.

That type of artificial intelligence can also be ap-plied to the millions of documents circulated every day in the freight industry. Using Optical Character Recognition (OCR), the machine learns what kind of document it has just scanned, who it belongs to, and what information is in it. This allows computers to do a lot of the manual work that people currently do—an incredible leap beyond what was possible before.

As you can see this type of automation involves a lot more than just imaging and document manage-ment. And even OCR and artificial intelligence are not enough. Intelligent back-office software needs three more things to work:

Complicated software can work if you are willing to spend weeks and months re-engineering your business and training your people. But that simply is not an attractive option for most companies.

Without integra-tion, you are right back to where we started – manually entering data and attaching documents into the TMS.

Installed software cannot do the job. Artificial intelligence cannot learn all it needs to know within the four walls of a single company. There are far too many interactions and market participants. Like Facebook, it must be cloud-based software.

So the solution is super intelligent, cloud-based software that adapts to your business and people. This kind of hosted software serves many users from the same platform; it is always learning and adapt-ing. And as a hosted, cloud-based service, the cost is low.

If you are a broker, you owe it to yourself to check out the new breed of transportation back-of-fice software.

Matt Bernstein is CEO of HubTran Inc. He can be reached at 630-544-0459 or [email protected].

Artificial Intelligence Comes to Brokerage


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C A L E N D A R

March 21, 2016 Marketing Transportation Brokerage Services

March 28, 2016 Certified Transportation Broker Home Study Course

April 11, 2016 Ethics in Transportation Brokerage

May 2, 2016 Temperature Control Transport

May 9, 2016 Partnership Selling in the Supply Chain

July 16, 2016 Certified Transportation Broker Exam

Open Enrollment Sign up Today! New Broker Course: Transportation Brokerage 101

For more information or to register for any upcoming events, please call 703-299-5700, or e-mail [email protected]. To see a full schedule for the coming year, visit the TIA Web site at www.tianet.org.

The Logistics Journal is a publication of the Transportation Intermediaries Association. To submit articles please contact Matt Hirniak at [email protected] or 703-299-5714. For advertising informa-tion please contact Jenni Vaught at [email protected], or 615-465-6250

1625 Prince Street, Suite 200Alexandria, VA 22314Phone 703-299-5700 Fax 703-836-0123E-mail: [email protected]

© 2015 Transportation Intermediaries Association. All rights reserved.

Robert A. Voltmann President & CEO Polly BondExecutive Assistant to the PresidentCindy AmosDirector of Education & MeetingsNancy O’LiddyDirector of Government Affairs Chris BurroughsSenior Manager Government AffairsWill SehestedtGovernment Affairs ManagerTom Malloy Director of Membership and SalesJenni VaughtSales Manager

Matt HirniakCommunications Manager Valerie SumnerMeetings Manager Ruth MikreMember Services AssociateKatie HendersonSales Representative

Jeff Tucker, CTB Tucker Company Worldwide, Inc.ChairJason Beardall England Logistics, Inc.Vice ChairMike RiccioLeonard’s Express, Inc.TreasurerBrian Evans, CTBL & L Freight Services, Inc.SecretaryGeoff Turner, CTBChoptank Transport Past ChairMark ChristosMatson Integrated LogisticsTIA Foundation ChairDoug ClarkAllen Lund CompanyTIA Services Chair

Kenny ClarkKenneth Clark Company, Inc.Airfreight Logistics Conference ChairSandi EdwardsLandstar System, Inc.Highway Logistics Conference ChairShelli AustinIDS Transportation Services, Inc.Intermodal Logistics Conference Chair

Rob RobinsonJ.H. Rose Logistics, LLCInternational Logistics Conference ChairSue SperoCarrier Services of Tennessee, Inc.TIA Political Action Committee Chair

James BeckerBecker LogisticsPaul BenferKinetic Supply–Chain Services, LLCBob BiesterfeldC. H. Robinson Worldwide, Inc. Tom Devine, CTBL&M Transportation ServicesJames DeMatteis, CTBDes Moines Truck Brokers, Inc.Steve Elliott, CTBRoehl Logistics, Inc.Jim MorseRFX, Inc. Mike NervickRichfield Capital Management, LLC.Gilles Roch, CTBG. Roch Consultant, Ltd.Jim Syfan, CTBSyfan Logistics, Inc.Dave Taylor, CTBMidwestern Transit Service, Inc.Bob ThomasSuddath Global Logistics

Mark ChristosMatson Integrated LogisticsChairBarcy Vidt, CTBJ. H. Rose Logistics, LLCTreasurer

Thomas A. Fiorini, CTBWestgate Global LogisticsPast ChairJim Tucker, CTBTucker Company Worldwide, Inc.CTB Committee ChairDoug ClarkAllen Lund CompanyEducation Committee ChairJeffrey R. BrasharesTTS, LLCRuss Caudell, CTBC. L. Services, Inc.Brian Evans, CTBL & L Freight Services, LLCSue SperoCarrier Services of Tennessee, Inc.Jim SyfanSyfan Logistics, Inc.

Doug ClarkAllen Lund CompanyChairRob KempDRT TransportationTreasurerMike RiccioLeonard’s Express, Inc.Past Chair

Sam AndersonBay and Bay Transportation

Gilles Roch, CTB G. Roch Consultant Ltd.

Donald McDonald, CTBUniGroup, Ltd.

John McDonald, CTBU.S. Traffic, Ltd.


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For the most current freight data, visit www.DAT.com

DAT® Freight Index — January 2016For the most recent freight index information, visit www.DAT.com

pot market freight volume declined 9.1 percent in January, and truckload line haul rates edged down, compared to December.

The month-over-month decline was typical of seasonal norms, according to the DAT North American Freight Index. January freight availability increased in only three of the past 20 years represented in the Index. The exceptions were January 2010, 2013 and 2014.

By equipment type, van freight availability declined 15 percent, and refrigerated (“reefer”) volume lost 8.9 percent, but flatbed trailers added 6.1 percent, compared to December. Spot market rates declined 1.3 percent for vans, 1.1 percent for reefers, and 0.6 percent for flatbeds, month over month, not including fuel surcharges. Hot States for Flatbed

Hot States for Van

Hot States for Reefer

Ratio of demand (loads) to capacity (trucks) by State

©2016 DAT Solutions. All rights reserved. All trademarks are the property of their respective owners.

1565

DAT Freight Index%Change Y-O-Y2012 2013 2014

(DEC)JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC

-37%-35%-37%-28%-27%-27%-28%-40%-44%-41%-44%-45%-37%

2015

419296249267

438432411335336291299308251

393284293251

374390405403410394408373412

654561517412

584577635559550515491421424

376353474428421459336307305275233267

4242016

243267

0

100

200

300

400

500

600

700

(Dec) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Inde

x:Ye

ar 2

000

=10

0

2012 2013 2014 2015 2016

DAT Freight Index 2012-2016


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http://www.qmags.com/clickthrough.asp?url=www.aljex.com&id=19805&adid=PCOVER 4A1





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