Top of Page



The Driver Shortage Dilemma

Those of us in the asset-based trucking business know that it is fraught with risk, regulation and rising costs. If there is any doubt, one need only look at the recent demise of New Century Transportation, a New Jersey-based carrier with more than $200 million in revenue and nearly 800 power units that suddenly shuttered its operation in June. The high cost of doing business, combined with the challenge of keeping trucks filled with drivers, contributed to its closure.

It’s important to understand how much the dynamics of business are changing. One of the biggest hurdles is the ability to recruit and retain qualified drivers to meet the needs of our customers. In the second quarter of this year, driver turnover in the truckload sector came in at a whipping 92 percent. As a shipper can you imagine having to replace 92 percent of your workforce every year? Even in LTL, with higher hourly wages and drivers going home most days, turnover is in the 10-11 percent range.

According to the Bureau of Labor Statistics, the average age of a truck driver in the U.S. is 55 years old. Based on the demographic, and factoring in retirements, those leaving the industry due to dissatisfaction and the lack of young people interested in driving as a career, you being to understand the challenge to provide sufficient capacity. Adding to the difficulty, regulatory burdens continue to impact driver utilization, with carriers seeing reduced productivity due to hour-of-service changes. Now factor in more stringent background checks for programs such as TSA, hazardous materials transport and more. This has disqualified those drivers on the margins, which is a good thing, but it further impacts capacity. Competition to find drivers is fierce. In tight markets such as Chicago, trucking companies are paying sign-on bonuses as high as $7,500 per driver.

So what’s the solution to the driver dilemma?

At NEMF, as well as at our truckload division, Eastern Freightways, we have found that “growing” our own drivers is providing us with another outlet to assist in meeting the demand. We are in the process of opening our fourth driver training school within our network. We have found great success in recruiting from our own dock workforce, trade schools, community colleges and the military to find those interested in driving as a career. We provide eight weeks of intensive classroom and hands-on training, these candidates use our equipment to take their road test for their CDL. After passing their road test, they spend another two to three weeks with an experienced driver mentor in either our P&D or Linehaul operation before they drive on their own.

Other initiatives we’ve taken to make the profession more attractive include:

How can shippers help? Understand that the driver shortage is not just a carrier problem. GDP has been limping along at an average of 2 percent the past five years. When the economy gets traction again, consistent GDP growth of only 4 percent will exacerbate the driver shortage issues. Keep in mind, nearly 70 percent of all goods moved in this country are hauled by trucks. You can work with your carriers to address items such as driver delay time (much of it is unpaid for those on mileage rate, which adds to the frustrations, which make the job unattractive).

Additionally, driver wages are going to have to increase to make the job desirable. According to a recent report by Morgan Stanley, driver base pay in the truckload sector has lagged behind inflation and private industry ages since the early 2000’s. When rates are flat or negative as they were for many years this is one of the outcomes. Carriers simply cannot absorb all of these cost headwinds on their own. It will take a concerted effort from the entire supply chain community to fill those seats.

Remember the cartoon “The Jetsons”? In the mid-60’s we thought we’d all be zipping around in flying cars by the turn of the century. How’d that work out? The latest possible solution in our industry is “driverless” trucks on the nation’s highways. Let’s circle back in 20 years to how that’s going.

In the meantime, let’s work together to figure out how we keep drivers in the seats of our seats of our trucks to move the commerce of our nation.

Thomas W. Connery, Executive VP and Chief Operating Officer at New England Motor Freight and the Shevell Group of Companies


Top Ten Common Characteristics of Great Supply Chain Partners

In Supply Chain Brain Magazine's annual "100 Great Supply Chain Partners" issue, they recognized companies for valuable service provided to those who voluntarily nominated them.

The nominators felt that their partners helped them in some important way to overcome real-world issues. They merely didn’t do what they were contracted to perform; they did what was necessary to ensure that the relationship was fruitful and beneficial to everyone involved whether it was cost savings, bringing efficiencies to operations, or winning new business that otherwise would not have been possible.

Thousands of nominations came in this year. As they were carefully reviewed, ten top characteristics stood out.

What do you need in a partner?

  1. Reliability – Good intentions are simply not good enough. A great supply chain partner has to provide consistent service to their clients and have the numbers to prove it.
  2. Excellence – This shouldn’t be a goal one day but an already existing quality of any partner.
  3. Value – Relationships are exceptional when they add value. What does your potential partner bring to the table?
  4. Expertise – Wouldn’t you want a partner that can teach you something you don’t already know?
  5. Problem-Solver – Any partner who isn’t pro-active is one that is always running to catch up.
  6. Continuous improvement – Does you partner recognize that one can never afford to stop learning.
  7. Support – Does you partner have not only the training and tools, but the desire to help your enterprise?
  8. Positive Attitude – You need a partner who thrives on the possibilities when obstacles inevitably crop up.
  9. Global reach- Partners with a similar footprint
  10. Strong leadership – Who’s in charge there, a manager or a leader?

These characteristics are vital for a supply chain partner to have and important for your company’s overall success.

"Reposted with permission from SupplyChainBrain"
Supply Chain Brain Magazine
July/August 2014 issue


Service Failures and Costs = Signs of Capacity Crisis

This year, if you have filled 100% of your shipping needs at 100% of the time you needed the truck, count yourself lucky, because the rest of the nation is not experiencing this.

Transportation Industry analyst, FTR, recently published their Trucking Conditions Index with a reading of 8.49 for July 2013, one of the highest points this year. The high values reflect rising prices and service lapses caused by the current capacity crisis.

Truck usage remains within 100 basis points of record levels, meaning any additional growth in the economy and associated freight will strain capacity even further, pushing shipping costs higher.

"When looking at the truckload market, for much of 2014 it has been a tale of two markets with spot activity very strong, especially in rates,” noted Jonathan Starks, FTR’s director of transportation analysis. “The contract market has been less robust but still showing signs of stress on capacity, costs and rates. You can expect to see those two markets merge this fall as a shipper’s core carriers get further stressed and contract rates move higher. The public announcements of strong driver pay increases by fleets are a testament to this fact. Despite easing over the summer, spot rates are still elevated versus last year. Keep an eye on the spot rate as we head into September, as they will be an early indicator of capacity shortages and stress in the system."

Combine all this with the Institute for Supply Management’s index unexpectedly climbing to 59 in August (up from July’s 57.1), the highest level since 2011, and the FTR index is destined to go higher. Thus, more higher occurrences of service lapses and higher costs.


Growing Issues for Shippers

The power that shippers have historically held over trucking companies is shrinking pretty significantly at the moment. As we have heard multiple times, the current market conditions are wreaking havoc on carriers. As capacity tightens further, coupled with the ongoing driver shortage, shippers can expect that their shipping cost will also increase. Not only will these market changes impact shippers, they will in turn also impact consumers as those increases in shipping costs will likely be factored into the price of goods.

In fact, right now, it would be safe to say that the trucking companies hold the power right now. Having little excess capacity has allowed them to be selective in the freight they handle as well as to request larger rate increases. One of the biggest factors for this current state of transportation, lead back to the Hours-of-Service rule instituted last year.

No one can predict the future, especially when discussing market changes. But it’s clear at the moment that shippers aren’t likely to receive the same rates they had last year. In a field strongly tied to current market conditions, it’s nearly impossible to predict what will happen next. The power that shippers generally have had will be restored at some point. The question is, "when?".

O’Reilly, Joseph. “Trends Shaping the Future of Logistics – Shippers Can’t Get No Satisfaction”. Inbound Logistics. July 2014: 36. Print


Intermodal Rail Takes A Bigger Piece of the Pie

By all accounts, 2014 has been a banner year for intermodal rail. U.S. Class I railroads continue to set intermodal volume records while shoveling billions of dollars into new equipment, infrastructure projects, and more employees to handle growing volumes.

For example, this year’s capex budget for BNSF is $5 billion — the highest ever and $1 billion more than last year. Some of that investment will accommodate growth in several key sectors, including intermodal and agricultural products.

Intermodal is the highest contributing segment of Union Pacific’s revenues, and in March, the railroad completed construction on its intermodal facility at Santa Teresa, N.M., which is strategically positioned to handle trade between the U.S. and Mexico.

The Port of Santa Teresa experienced a 13 percent increase in annual truck crossings between 2011 and 2013, and future expansion plans mean the Port could eventually rank as the largest inland port in North America and a major gateway for an array of shipments from Mexico, including agricultural products, computers, auto parts and other manufactured goods.

CSX announced in July it would increase its 2014 capex budget by an extra $100 million to $2.4 billion to enhance infrastructure and add freight cars. Intermodal and agricultural products are also key segments of the railroad’s portfolio.

The Jacksonville, Fla.-based railroad also plans a new $43 million expansion of its National Gateway rail hub in northwestern Ohio, adding two more widespread cranes and new processing track, which could increase capacity from roughly 650,000 containers annually to over 1 million containers annually.

Collectively, freight railroads will spend about $26 billion this year, according to the Association of American Railroads’ estimates.

What’s fueling growth?

There are a number of factors responsible for intermodal growth in the U.S., and one may be somewhat of an anomaly. Specifically, the negotiations between West Coast longshore labor and marine terminal operators prompted shippers to expedite imports through major West Coast gateways this year, resulting in an earlier than normal peak season as well as record high intermodal volumes for major freight railroads.

However, the ongoing freight conversion from road to rail remains a big factor in the steady and sizeable growth the intermodal rail sector has experienced in recent years.

According to Schneider’s Jim Filter, senior vice president of intermodal commercial services, one reason customers are converting from over-the-road (OTR) to rail is to secure capacity. Regulatory issues such as those associated with hours-of-service rules along with truck driver shortages and high fuel prices are forcing even more shippers to seek transportation alternatives.

"The shippers that are out there now securing OTR capacity are doing so at much higher rates that what they were doing before,” says Filter. “So while they’re looking at intermodal as an alternative way to secure capacity, they’re also doing so to mitigate costs while growing that capacity."

That trend is likely to continue because OTR carriers “still have some ground to make up in terms of pricing,” he added. “They are going to be very aggressive on the pricing front and I believe that is going to drive even more shippers to convert to rail in order to increase their capacity.”

Schneider is responding to increased customer demand for more intermodal rail capacity and the company is investing heavily in 53-foot intermodal containers. “We’ve already added 3,000 more containers compared to what we had just 12 months ago,” says Filter. These intermodal containers hold up to 50 double-stacked pinwheel pallets, which means shippers get 10 to 15 percent more palletized cargo space compared to a standard container.

A variety of shippers see the benefits of intermodal rail, including food and beverage shippers. Filter points out that major shippers in these sectors are increasingly integrating rail into their supply chain strategies for both ambient and temperature-controlled shipments.

"This winter was challenging for everyone, but especially food shippers,” he says. However, “We really saw a difference between the food shippers who had well thought-out plans and those who were caught off guard.” In particular, “Those that did have good plans were able to avoid using reefers even during extreme weather."

For example, a number of food/beverage shippers use detailed weather forecasting for their intended routes, and prepare and adjust accordingly, he says. "Based on the weather forecast, they identify precautions they need to take for that route or find alternate routes or modes of transportation."

In addition, railroads and shippers are optimizing how they load the containers — keeping product off the floor, away from container walls, and using insulated blankets on the product to guard from excessive heat or cold.

As for the long-term outlook, both the trucking and rail sectors stand to benefit from growing freight volumes. A recent report from the American Trucking Associations (ATA) states overall freight tonnage in the U.S. will grow 23.5 percent and freight revenue will surge 72 percent from 2013 to 2025.

The trucking sector’s share of freight tonnage is expected to expand from 69.1 percent to 71.4 percent over that time frame, compared to rail’s market share, which is forecasted to drop slightly from 14.5 percent in 2013 to 13.8 percent in 2025. Nonetheless, that ATA notes that "truckload carriers will make greater use of intermodal rail for intermediate- and long-distance hauls."

By Lara L. Sowinski, editor-in-chief for Food Logistics (www.foodlogistics.com). This article originally appeared in the August 2014 edition.


Carrier Service Metrics


Carrier Profile - "Wilson Trucking"

Customer Area
User
Password
Forgot Password?
Register