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Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard,
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

In our professional work, buyers generally engage at the Business to Business (B2B) level, seldom at the retail level. Yet Business to Consumer (B2C)  is a daily part of our personal lives. Do we consciously apply our principles of B2B to B2C for spend on automobiles, furniture, appliances, and major repairs?

Buying and selling of automobiles is a favorite topic. I wrote an online course about is several years ago.  Most of us buy only a handful of cars in our lifetimes. But we take our autos to maintenance/repair shops frequently, whether to the dealer for warranty service or elsewhere for routine repairs and purchase of tires, batteries, wipers, and other parts and services.

A poor experience with dealer service a decade ago prompted me to source alternatives. An obvious source was the many chains of auto repair stores, some of which units of major big box retailers.  Others are national or regional chains specializing in batteries, tires, transmissions, etc. However, the best are often the many small independent community oriented shops whose service is better and prices are lower than their larger competitors.

About two decades ago, dealers began the practice of charging a “diagnostic fee”.  This $100 or so fee pays for a computer scan. Many dealers would waive the fee if the work was subsequently performed. Many chain shops now impose this diagnostic fee as well. The fee is designed to make you do the repairs at the diagnosing shop to avoid wasting the fee.

upsellNot only is this fee odious, recognize that it generates the basis for upsell of many services. A problem for the motoring public is that today’s vehicles are high tech, computer controlled precision equipment. So if the service technician, a sales person in a uniform, says that you need a synthetic whatchamacallit for $565, what do you do? My advice is to avoid this scenario by sourcing a local independent shop in advance of your need for repairs and maintenance. Despite our best efforts, good planning sometimes meets the unexpected.

Recently, I was driving my daughter’s 2007 Jeep Patriot because she had my favorite car, a 1999 Subaru Forrester with manual transmission. An aggressive semi driver forced me up onto a concrete median, shredding the driver side tires and damaging the aluminum rim wheels. Fortunately, there were no bodily injuries but this incident began the B2C rodeo.

My American Automobile Association (AAA) membership paid for my tow to a tire shop, the identity of which does not matter because the pattern of behavior is the same at most chains. At first, the shop wanted $450 for two tires and alignment. I balked, suggesting I would drive with flats across the street to a competitor. Immediately, the price dropped to $330. Maybe that was not the best I could have done but getting back to business was more important at that moment.

A few hours later, the shop called to say that the 17” Aluminum 5 spoke rims were ruined and that the OEM price was $465 each jeep-rimsbut they found a salvage price of $275 each. Horse feathers! I demanded that they send a picture of the ruined rims to verify the damage.

Then I remembered that some years ago, when the Subaru would not pass inspection due to a broken taillight assembly, a chain wanted $350 for a new replacement. I found a used, but mint condition assembly on Amazon or eBay for $31 plus $7 shipping, less than 10% of the chain price.

Building on that experience, I found the rims online for $130 plus $25 shipping each. The repair shop matched the price. It had no shame about willingness to gouge the customer so it is always caveat emptor with new suppliers. When I asked for the AAA discount, at first he said it was already applied, but found an “additional 5%” he could deduct.

All of these recitations above are familiar to us. How we manage them differs. Apply your professional training to your personal pursuits and you will serve yourself well.

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard,
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

For many years, I have blogged about buying new and used cars and even authored an online course on doing so.  Automobile sales have been up for 2014 and 2015 as owners increasingly replace their older cars, an average of 11.5 years according to USA Today citing an IHS Marketing survey in 2015.  Nevertheless, does the dawn of driverless (autonomous) cars and burgeoning presence of firms like Uber and Lyft signify the end, or at least the decline of automobile ownership?

Curiously, over the 2016 Black Friday weekend, radio, TV, and print media offered up mixed stories on brick and mortar versus online shopping. Traditional walk in retail sales are off compared to previous years while e-tail sales continue their steep upward curve.  Stories cited full parking lots and overflow in surrounding office building lots to accommodate the driving hordes of shoppers.

Don’t these two paragraphs signify an impending a culture clash for the near future? According Wikipedia, US Cities without car ownership, the eastern megalopolises of New York, Boston, Philadelphia, Washington, DC, and many others dominate the list.  Except of DC, these cities were laid out on a Medieval European pattern in which transportation was conducted by beast drawn carts.  Yet, contained in the list of top 50 are newer Western cities such as Fort Worth, Los Angeles, Berkeley, and Seattle.  The U.S. Census Bureau states that in 2010, 80.7 percent of the U.S. population lived in urban areas where public transportation infrastructure is well developed and Uber and Lyft flourish.

uberAmidst these mixed messages, businesses and government in my home community of Dallas are planning hundreds of millions in new parking garage investments.   This is so curious to me because when we moved here in the late 1990s, on street parking spaces were plentiful.  A few years later, Boeing chose to relocate its headquarters to downtown Chicago rather than Dallas as Big D lacked a vibrant street life even though it had far superior airports.

The two ensuing decades have seen the once spacious 1980s vintage downtown office towers devolve to cramped cubicles with shoe-horned employees, many of whom drive to work. Urban mass transit in Dallas is not at the state of the art, with the possible exception of Dallas Area Rapid Transit, or DART.  A predictable consequence is a public and private push for parking garages, including some built over sunken Interstate highways.

In a rather prescient column written by Dallas Morning News’ (DMN) Steve Brown on the Black Friday 2016 weekend, he speculates on what may happen in a generation when these parking structures are no longer needed.  Brown cites autonomous cars, increased interest in mass transit, and his assertion that almost half of downtown Dallas residents do not drive.  As back up data, Brown says that only 60% of American 18 year olds have driver’s licenses and that millennials buy 30% fewer cars than previous generations.  Brown also reports that builders and developers are designing new garages to accommodate conversion to apartments or hotels, at least on upper floors.  This reminds me of twenty years ago when hospital construction was designed to accommodate conversion to apartments or hotels if the health car market failed.

Clearly, the winds of change are blowing. We can only feel the breeze in Dallas, where we still cherish the independence of our own transportation, cars or horses.  But the winds are at gale force in places like Boston and New York, the two most expensive cites for parking with monthly rates exceeding $500 and daily rates exceeding $40, according to a Colliers International Parking Rate Survey.

Are cars going the way of buggies? They certainly have a murky future on the urban landscape, New York and Boston sooner, and Dallas later.  Maybe I should write an online course on how not to buy a car…

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard,
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

The American Purchasing Society is serving the demands of the supply chain professions with its new Certified Professional in Distribution and Warehouse Management (CPDW).

According to the Society’s site, this professional designation is open to any supply chain pro. The CPP is not a requirement and there is a separate application . The requirements for the CPDW are three online courses and an examination. The courses may be taken separately or through the CPDW prep course.

The three courses are

Once the courses are completed the CPDW examination must be taken and passed with a grade of at least 75%.

Why is CPDW important to buyers?

forklift_logoIn my consulting and training practice in our profession, the overlap of purchasing with inventory, warehouse, and logistics responsibilities is extensive. Many purchasing departments manage these departments and are in need of reliable education & training resources to help.  Here is how the Society is the source of choice for CPDW.

Distribution and Warehousing   This course is Part 1 of the CPDW Exam regime. It teaches principles of warehousing, related functions, types of facilities, as well as warehouse design and space requirements, equipment, operating activities, locator systems, and product identification.

Inventory for Distribution and Warehousing   This course is Part 2 of the CPDW Exam regime. It teaches many aspects of inventory and how they relate to distribution and warehousing functions. It covers types of inventory, types of controls, record keeping, item identification, locator systems, RFID, counting methods, and much more.  Although this course emphasizes how inventory relates directly to distribution and warehousing, purchasing people who have already taken Managing Inventory – Maintaining the Proper Level do not need to take this course in order to be awarded the CPDW. Part 1 and 3 are still required, and the exam must also be passed.

Management Operations and Logistics   This course is Part 3 of the CPDW regime. It teaches management operations and includes information on its purpose, duties, decision making, organizing, staffing, planning, controlling, and more. Other areas covered are management psychologies, human resources and the law, transportation and logistics, domestic and international transactions, and ERP.  Anyone who has taken Management Operations and Logistics will be given credit for having completed Part 3 of the CPDW.

Let me know of your success.

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard,
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

On Wednesday, 22 June 2016, I again have the good fortune to serve the International Sign Association with a workshop talk at its Converge meeting in St. Louis.  The ISA, as are many other industry groups, provide a “Purchasing Track” because members and suppliers like recognize that purchasing is the single most efficient generator of profitability in all of business.

Last year in Denver, the topic was “How Buyers Think, Decide, and Act”. It went so well that this year, we have decided on Purchasing, Law and EthicsYou’d Be Surprised!

You may think, “Ugh, that topic sounds boring”If a professional speaker cannot make the material come alive, demonstrate relevance and value, and entertain you in the process, he or she needs to find another line of work.  At the magnificent Four Seasons Hotel in St. Louis, the Gateway to the West, ISA sponsors this workshop that serves both purchasing and sales pros.

Here are some questions we will discuss: (HINT – study up cuz there will be a quiz or two)

  1. Is it illegal for a buyer or seller to be dishonest in negotiations?
  2. Is it illegal for the buyer to tell the supplier what the price needs to be?
  3. Is ethical behavior required, suggested, or not mentioned by the law.
  4. What is or are the UCC?
  5. What is or are the CISG?
  6. What is the significance of the Robinson-Patman Act for buyers and sellers?Legal Vs. Ethical
  7. When is a gift to a customer a bribe (Hmmm)?
  8. Is a written contract required for the purchase & sale of goods?
  9. Can a buyer ethically divulge an incumbent supplier’s price?
  10. Is the price term necessary for the purchase & sale of goods?
  11. Define “goods”.

If all your answers are correct, you need not attend.  However, the next one who gets all answers correct will be the first!  None of us are born knowing this stuff.

Embarrassing Anecdote 

Upon reaching a negotiation impasse many years ago, I told a bright sales woman that, “I be Tarzan, you be Jane.” Jane politely ignored my flaming ignorance and instructed me how acceding to my request would put us both in legal jeopardy with Reciprocity law.  I did not even know what Reciprocity was!  We still remain in touch as she helped save my “bacon”.  That lesson remains with me as do the painful memories of other similar legal and ethical gaffes.

Speaking of saving bacon, look at the little piggy to the right. As a sales pro, did you ever make the colossal mistake of asking, “Where do I have to be?”  Where do I have to be For the purchasing brethren, have you made the colossal mistake on the opposite side of the desk?  Did you get a little clever by suggesting a target much lower than competitors?  Did you indicate a range? Do we all realize that we are committing a crime when we engage in this behavior?

What will happen in the workshop?

The presentation will be energetic, humorous, and encouraging of your participation. Come prepared to do most of the work because interacting with fellow pros produces the best results.  We will do several exercises and quizzes in small teams.  You will record your input on flip charts and I will take your work with me so as to produce a post workshop report that ISA will distribute to attendees about 30 days after the event.

Each participant will receive a copy of You’re the Buyer – You Negotiate It.  You’ll also be receiving a Report on the session by the end of July.

See you in June at the sumptuous Four Seasons hotel in the fabulous town of St. Louis, Gateway to the West

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

A favorite energy writer is James Osborne at the Dallas Morning News.  In a Christmas Eve 2015 story , Osborne cites a U.S. Energy Information Administration (USEIA) report that states that in April 2015, less electricity came from coal than natural gas for the first time since at least 1973. That trend repeated in July and continued through October and may do so for a while longer do to the 40% drop in Natural gas prices over 2015.

How does price of fuels affect electricity

The answer seems like it should be straight forward. Most evaluations concerning energy and sustainability rarely are. The 11-Dec-2015, Central Appalachia coal price is $43.50 per short ton according to Quandl . Coal prices range from a high of almost $50/ton (short ton of 2,000 pounds as opposed to a metric ton of 2,206 pounds) but the Central Appalachia price is a common standard.  Correspondingly, Natural gas prices out at $2.37/MMBtu according to the Henry Hub, a common benchmark.  We cannot compare prices using different units of measurement so we must convert to a common unit.

In my 2011 book, Green Purchasing and Sustainability,  I offer the Btu/$ as the best solution.  According to the USEIA, “The average heat content of coal produced in the United States in 2012 was about 20.21 million British thermal units (Btu) per short ton. The average heat content of coal consumed in 2012 was 19.55 million Btu per short ton. Assume that one ton of coal contains 20,000,000 Btus and one MMcf (Million cubic feet) of natural gas contains 1,000,000 Btus, by definition. Using the current prices the Btus/$ for one ton of coal is 20,000,000/$43.50 or about 460K Btu/$. Natural gas is 1,000,000/$2.37 or 422K Btu/$, slightly lower, but not enough to justify any massive changeover from existing technologies.

Total Cost of Ownership

Political considerations tend to be bogus so let’s stick to the economics and science. Natural gas has many advantages in both. We take science first.  The USEIA lists these carbon dioxide (CO2) contributions with the accompanying text. “Different fuels emit different amounts of carbon dioxide (CO2) in relation to the energy they produce when burned. To analyze emissions across fuels, compare the amount of CO2 emitted per unit of energy output or heat content.”

Pounds of CO2 emitted per million British thermal units (Btu) of energy for various fuels: (per USEIA)

Coal (anthracite) 228.6
Coal (bituminous) 205.7
Coal (lignite) 215.4
Coal (subbituminous) 214.3
Diesel fuel and heating oil 161.3
Gasoline 157.2
Propane 139.0
Natural gas 117.0

 

The science is described by USEIA this way. “Natural gas is primarily methane (CH4), which has higher energy content relative to other fuels, and thus, it has a relatively lower CO2-to-energy content.”  Expressed in common terms, this table shows that Natural gas is almost twice as clean as coal.

Now comes the TCO cost advantage. Coal must be transported from sources to end user, adding both cost and greenhouse gas emission.  Natural gas is transported via pipeline, a far less costly, more efficient, and with less greenhouse gas emissions.  Coal must be unloaded, stored for use, using belt conveyors or other devices.  Supplies must exceed average replenishment rates to account for weather, train, and other problems.  Natural gas is available on demand and has far fewer delivery problems.  On site storage is rare.

The contribution of fracking

Osborne notes that, “The shift in fuel use in the power sector comes as gas prices fall to historic lows, driven down by the flood of hydraulic fracturing and horizontal drilling operations across the Midwest and Texas.” He closes his story with this observation, “Over the past five years, natural gas-fired electricity has grown from 25 percent of the power supply to 35 percent. Over that same time, coal’s share dropped from 43 percent to 31 percent.

The next time some under-informed and self-proclaimed guardian of the environment throw stones about fracking, remind him or her that not only is it clearing a path to energy independence, but that path is less expensive and cleaner.

God Bless American ingenuity and enterprise.

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Five years ago, while researching and writing Green Purchasing and Sustainability,  I discovered the “No Left Turn” policy developed in 2005 by UPS .  Ten years ago, UPS plotted driver routes using Global Positioning System (GPS) technology to save 28 million road miles, 3 million gallons of fuel, and earned much greater driver delivery efficiency by eliminating left turns.  It was a quintessential example of sustainability and cost savings.

green_purchasing_shadowWire reports this fall cite how UPS is increasing its efforts to go green and earn more green in the process.  In a typical nine hour shift, UPS drivers make between 50 and 150 deliveries and confront unpredictable and ever changing traffic challenges.  Encouraged by the success of technology and the cost savings which are also sustainability gains, UPS is raising the bar with a goal to save more than 100 million miles of road trips per year.

The motivation is an increase in online sales.  Black Friday 2015 earned the highest volume of Internet sales ever and is seen as an omen for the future by many retailers.  The National Retail Federation expects annual growth of 6% to 8% in online sales at the expense of traditional brick and mortar stores.  All of these online sales are not picked up at stores and must be delivered and thus the bonanza for courier firms like UPS and FedEx.  FedEx and UPS expect double digit increases in shipments for Christmas 2015 compared to Christmas 2014.

Technology plays a huge role

The goal is to use computers to minimize “human touches” as each touch introduces the possibility of an error.  Current software packages allow workers to process 40% more packages, a huge productivity gain.  But that is just the beginning.

UPS employs a routing technology called Orion, an acronym for On-Road Integrated Optimization and Navigation  which will be used on 70% of UPS routes this Christmas season.  According to UPS, it saw a reduction of 6-8 miles per route driven last year, which translates to lower fuel costs, emissions, tires, vehicle maintenance, etc.  The expectation is that UPS will reduce mileage by 100 million and reap all the savings along with sustainability gains.

UPS saved 3 million gallons of fuel during its testing of the program from 2010-2012 and says it will reduce consumption by another 1.5 million gallons this year. Once the program is rolled out to every driver by 2017, the company says it can save $50 million by taking just one mile off each of its driver’s daily routes.  That is impressive by any standard.

UPS touts the environmental benefit of reducing fuel costs claiming that 1.5 million gallons of saved fuel eliminates 14,000 metric tons of carbon dioxide emissions. Is there any clearer evidence that green purchasing equals cost reduction?

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Not every advice column in newspapers have good advice. Such was the case in a recent story taken from a blogger at GoBankingRates.com. It cited 3 things to never say at a car dealership (sic, the infinitive was split in the title), only one of which was valid.

When you buy a car, you are negotiating.  As such, preparation is your most important obligation. You should never set foot on a dealership unless you have studied the market, models, and prices via the plethora of online resources.

A flawed suggestion

The story says that “price discrimination” is perfectly legal technique. This is odd because the Robinson-Patman law specifically outlaws discriminatory pricing.  The larger point trying to be made, albeit clumsily, is that this is a game of poker so keep your poker face; do not let your enthusiasm betray your wallet.

Instead, recognize the reality of what you are doing, buying transportation via a depreciating asset. Let that by your attitude rather than taking the trite, obvious, and transparent tactic of finding things wrong with the car and offering to pay 10% less than what you actually expect to pay.

This is a fool’s errand. You buy a car every few years; the salesman sells cars for a living, often closing several deals a week. He is the pro, you are an amateur ingénue on his turf.

The story is correct about doing price research. Even so, different dealers are willing to offer a vehicle with identical equipment for substantially different prices. Sometimes, it is the identical vehicle as they trade inventory to make a sale. There are back end deals, manufacturer bonus offers to dealers, and so much more that you just do not know.

Once you know the car you want, look for it online, obtain pricing information from a variety of sources and solicit online offers from dealers.

blog 74B pushy salesTwo points were good advice

The story speaks of monthly payment buyers. I agree, never say how much you want to spend either in lump sum total or monthly amounts. This opens you to all kinds of games and manipulation. It is also far better to obtain financing ahead of time from a financial institution rather than endure the Finance and Insurance or the  so called, “Business Manager” at the dealership.

Lastly, recognize that extended warranties are largely a waste of money.

Happy car buying experience.

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Purchasing expertise is a rare commodity. Most purchasing subject matter experts are company or industry specific. Moreover, this micro population in general has neither interest, willingness, or appreciation for how to serve commerce at large nor knowledge of the legal process. Therefore, attorneys usually do not know where to find an expert witness in purchasing when they need one.

Google “expert witness in purchasing” and depending upon the day, my name, web site, or blog comes up in 4 to 7 of the top 10 organic results and the American Purchasing Society , a strategic partner, fills another 3 or 4 slots. This is further evidence of how elite is the pool of expert witnesses in purchasing.

Why so? 

An expert witness in purchasing must possess a blend of talent, skill, and experience ingredients. Among credentials in the purchasing profession, the Certified Purchasing Professional is the threshold criterion. Knowledge of the legal process, ability to understand and digest the concept of “discovery”  and a comprehensive mastery of purchasing laws are mandatory. For commerce within the U.S., expertise with the Uniform Commercial Code (UCC)  is an absolute requirement, at least as to the purchase and sale of goods. Further, the purchasing expert witness must be practiced in contract law and forms of contract.

 What do lawyers want from a purchasing expert?

A lawyer seeking expert witness services in purchasing, or any other subject for that matter, wants a virtually unimpeachable authority, or at least less impeachable than the other side’s expert. Fortunately for the legal world, there are so few purchasing expert witnesses that finding and qualifying one usually makes all the difference.

Every expert witness case involves strict ethical and contractual limitations as to disclosure of names, cases, or other identifying information. As such, it is important to have attorney references from previous cases. The attorneys discuss the expert’s abilities but not the specific cases. The expert witness should never divulge the cases and parties with which he is involved.

Expert witnesses don’t usually dispute facts unless they are arguable or shaky. Rather, the expert witness’ role is to interpret facts and render an opinion. The crucial wording for expert witnesses is “to within a reasonable degree of certainty.” The review of discovery documents, preparation of the report, deposition, and even testimony at trial all have the same goal, the formation, presentation, and documentation of the expert opinion.

Frequently, testimony at trial is not required as cases settle before trial. The rational is that it is better to settle before trial, even if on the courthouse steps. http://www.forbes.com/2010/07/21/when-to-sue-entrepreneurs-law-taxation-bovarnick.html The Expert Witness Report can be enough to move parties toward settlement. Sometimes, a report is not necessary. Here is an example.

A law firm engaged me to render an opinion for their internal use only. That is, they wanted to know how I saw the chances of success. This happens on occasion. Their client was an insurance company that insured a Mom and Pop independent retailer. The retail store owners had purchased fireworks in one state, where it was legal, but sold them in their home state, where it was illegal. A customer got hurt, sued the retailer, who had no money, so it was on to the deep pockets http://www.yourdictionary.com/deep-pocket of the insurance company. The attorney assessed his client’s position as week and open to extensive damages.

The facts were messy, few documents, oral contracts and disputed accounts of what had transpired. Their only question was if any principles of professional purchasing had been violated, in my opinion. After review of some of the salient points, I advised them that there was little I could offer given the facts and information supplied. I am certain they proceeded to settlement negotiations rather than risk a jury decision.

November 6th, 2015 | Tags: , , , ,
Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Editor’s Note: This is a non-business post, one of but a handful in the seven years of this blog. All of us have families and personal stories; this is one of mine. For my sales brethren, yes, it is true, we supply pros have a personal side.

Dad was a WW II veteran, a proud Marine who enlisted in 1943 at 17 years old. What were you doing at 17? I was an irresponsible, fun loving kid, as were most of my baby boomer companions. Little did I appreciate how much Dad and his compatriots did for the baby boomers and the country at large.

Education has been a driving passion for me, in part because my father, who did not finish high school, was a learning advocate and as studied as any graduate student of his era. I inherited the passion for education from Dad and went on to be the first in my family lineage ever to have graduated from college. Indeed, my practice in education & training for the purchasing profession is but one manifestation. How I wish I could tell him now how much I appreciate him. Maybe he can feel my admiration.

My younger brother Dick and I are 15 months apart. One day, when we were 5 and 6, we stole into Daddy’s ’53 red Ford pickup truck in hopes of emulating his behavior when he gave us rides. How we loved riding with Daddy in his truck – no seat belts on the bench seat, roll down windows, and running boards.

1953 Ford pickupIn the 1950s, pickup trucks had an ignition switch, a starter switch, a manual choke, clutch, and an accelerator, a total of five controls. Accordingly, it took one hand each for the ignition, starter, and one foot each for the clutch and accelerator, and if you did it all correctly and quickly, you could adjust the choke so that the truck started. The transmission was three speeds with a column shift. When parked on the dirt path, the track was always left in first gear to prevent rolling backward.

My brother and I liked to play in the truck bed. One day, we climbed into the cab to try our luck at driving. Our legs were too short to reach the pedals but we made a discovery. When we pressed the starter and ignition together, the truck bucked forward. It was a great thrill and we laughed, doing it again and again until Daddy came out to give us what for!

I do not know what prompted this memory but it moved me to write about it. It has elements of fun, mystery, adventure, learning, innocence, and consequences. From our earliest memories and experiences, there are lessons that stay with and influence us for a lifetime. Thanks, Dad.

Robert Menard,  Certified Purchasing Professional, Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Robert Menard
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager

Transportation of goods is such an interesting and constantly changing market dynamic. I learned a good deal about transportation in the late 1990s when I was hired to research, write, and deliver a program on logistics for the Portland Cement Association.  A few years later, I was fortunate to write and deliver training programs for Burlington Northern Santa Fe Railways (BNSF)  , where I learned much about transportation in general, and rail transportation in particular.

For more than a century, trains hauled coal, the workhorse fuel of choice in the U.S., even as oil and gas grew more competitive through much of the 20th Century. Coal was hauled on “unit trains”, meaning one cargo category for the entire 100 – 125 car shipment, as opposed to “manifest” trains, meaning mixed cargo categories distributed on cars of the shipment. Coal shipments are falling off as alternative fuels become preferred energy options so why are BNSF and competitors like Union Pacific Corp (UP) and CSX Corp investing so heavily in new infrastructure and capacity?

Railroad operators have seen a drip off in coal traffic of 20% in the past five years, according to data compiled by Bloomberg Business.  On the other hand, failure to build the XL Pipeline has been a huge boost for rail firms. They are buying new tanker cars since rail transport is cheaper than truck transport of petroleum products. But that is not all. Rail companies are investing heavily in new track lines and facilities. Here is why.

BNSF locomotiveBNSF is nearly finished with a second parallel rail line along the 2,200 mile Los Angeles, the busiest U.S. container port to Chicago, the biggest mid-continent rail hub. The second track will virtually eliminate sidetracking as oncoming trains approach each other. For decades, trains on the single track headed toward each other had to communicate so that the priority train (BNSF and UP refer to priority trains of Amtrak passenger or unit FedEx or UPS freight as Z trains) could proceed and the secondary train side tracked. Both trains had to slow down over long periods of time and lost hours in the process.

Without cumbersome sidetracking, longer trains will be able to travel at higher speeds, increasing load and decreasing time. An industry source, FTR Transportation Intelligence estimates that rail moves less than one-fifth of the 71 million trailer loads that travel 550 miles or more. The 550 mile cutoff is the accepted distance where rail becomes the preferred alternative. For comparison’s sake, one rail car carries as much freight as four truck trailers so a 100 car train hauls the equivalent of 400 trailer trucks.

Converting road cargo to rail cargo is the goal of the infrastructure investment. The lure for customers is substantial savings. Over the road, one ton of freight can be moved approximately 60 miles on one gallon of fuel. That same ton of freight can be moved 200 miles over the rails for the same gallon of fuel. Using $2.00/per gallon as a fuel price, it costs $0.033/ton-mile over the road and $0.010/ton-mile over the rails to move one ton of freight – less than one third of the cost! Multiply that difference by hundreds of thousands of tons and the savings become irresistible, or so goes the theory.

According to XPO Logistics , about one third of long-haul freight it sends by truck can be switched to train. Industry wide, XPO estimates that about $100 Billion in business could be switched to rail transportation.

It will take some effort to persuade shippers to shift from road to rail. Still, some freight categories less time sensitive like auto parts, furniture, and building materials are probably moved more efficiently and cheaply by rail. One of the biggest investors in rail is Warren Buffet, chairman of Berkshire Hathaway. Betting against Warren may not be a good business decision.