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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All
 

From SCDigest's On-Target E-Magazine

- April 21, 2015 -

 

Supply Chain News: Transportation Industry Executives Share Views on Logistics Challenges and Opportunities

 

Capacity and Drivers are Key Issues of Course; Length of Haul is Declining Due to eCommerce


SCDigest Editorial Staff

 

The NASSTRAC organization just completed its 2015 conference in Orlando last week, and SCDigest editor Dan Gilmore was there, providing both written and video summaries of all the action. (See Trip Report: NASSTRAC 2015).

On day 1 of the conference, Dr. John Langley of Penn State moderated a panel of trucking industry executives, who offered up some interesting views on trends, challenges and opportunities in the US logistics arena.

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"The real challenge is to how to align the objectives of shippers, the carriers, and the 3PLs," moderator Langley noted - easier said than done, unfortunately.
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The panelists were: Henry Maier, CEO of FedEx Ground, Jack Holmes, president of UPS Freight, Judy McReynolds, CEO of ArcBest, and Derek Leathers, president of Werner.

Leathers and McReynolds both noted some interesting dynamics with in-cab communication systems, saying that especially with expedited freight movement, shippers sometimes want to be able to talk directly to driver's about status - something both Werner and ArcBest do not allow.

"We try to focus everyone on the big pisture, which is an on-time rate of 99.8%," Leather s said. "You don't need to sweat each shipment. Everyone panics if a driver [for expedited freight] stops and takes a break."

FedEx's Maier noted that impact of shipping costs on consumer decisions on whether or not to buy over the web, saying research showed shipping costs were even more influential than consumer product reviews in a buy/no-buy decision.

That said, Maier noted that some reality needed to be put back into ecommerce shipping, "because shipping isn't free," and suggested etailers may address this by shipping to a common location (store, locker bank) from which consumers have to pick up the order themselves, saving the etailer the "last mile" shipping cost, which are substantial.

UPS' Holmes said that "the story is still being written" with regards to efulfillment generally, and noted that ecommerce has changed shipping dynamics due to the high levels of returns.

"The six weeks after Christmas are now some of the highest flows of the year," he said, from what used to be a very dead period.

He also noted UPS' huge investment to avoid a delivery meltdown in peak season 2014 as was seen in 2013, and that while it solved the problem, it was almost overkill.

Holmes said "it was like building a whole new church just for Easter." Of course, UPS has hinted that it is likely to apply some type of peak season surcharge for this coming year to offset some of its extra costs associated with ramping up capacity temporarily.

Leathers noted that ecommerce has had a big impact on length of haul for truckload carriers, saying that as retailers and manufacturers have begun putting merchandise closer to customers, the average length of haul has fallen from 700-800 miles not that many years ago to 500+ today.

That change has many implications, starting with the fact that it means trucking companies are getting less return on their assets (less miles driven per day), which ultimately is helping to push per mile rates higher. It also contributes to the driver and/or capacity shortage (more "overhead' time for pick up and delivery relative to length of haul) and from reducing the amount  a driver can make in a day. However, it might also provide some lifestyle improvements that drivers, especially younger drivers, might enjoy.

Leathers also noted that the costs of new trucks keeps rising, now to about $200,000 for Werner when it acquires a new tractor paired with two or three new trailers, as environmental regulations continue to drive up the cost of equipment. He said that while there were robust new tractor sales in 2014, industry capacity actually decline 1% in the truckload industry, as almost all purchases were for replacement rather than adding tractors to the fleet.


(Transportation Management Article Continued Below)

 
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That cost impact is filtering down to smaller carriers and even the independent owner-operators that currently still represent a significant portion of the industry's total capacity. Rising new truck costs means an independent might need to come up with $90,000 to get a new tractor after trade-in, versus some $45,000 a few years ago. At this much higher cost, getting an acceptable return on investment is obviously that much more challenging - if the trucker can find a bank or other source to lend him or her that much money.

Holmes said there is tremendous progress being made in driverless passenger cars and trucks, but whether consumers and the overall climate is ready for technology that is a whole other question.

Much of the lane crash avoidance and collision avoidance technology has been around for some 15 years, Leathers noted.

"The technology is running well ahead of the regulations," Holmes added

Just about all execs said their companies have been in the process of rethinking their relationships with brokers, even as Werner and ArcBest ramp up their own internal brokerage capabilities. Almost all the execs said they were significantly paring down relations with brokers that were more "transactional" (meaning very focused on price) to ones that were "sustainable," in Leathers' words. The upshot for shippers of this change is that some carriers may not be available from the pool with which a given broker works. It would also suggest that prices through other brokers may rise a bit.

"The real challenge is to how to align the objectives of shippers, the carriers, and the 3PLs," moderator Langley noted - easier said than done, unfortunately.

Leathers said the driver shortage is causing shippers to be more concerned about efficiencies and treatment of carriers and drivers than he has ever seen before, but that nevertheless the driver situation is going to get worse. He said that while driver pay certainly matters, lifestyle issues, respect from carriers and shippers, the quality of the equipment a driver is given - all these factors probably contributed just as much to driver retention as per mile rates do. Werner actually launched a program in which company drivers can email executives about treatment issues by the company or the shippers it serves. He said they get about 10-15 such emails a day - much fewer than they were expecting - and that they follow up on those messages in earnest.

There is of course much hope that rules will be changed to allow heavier and/or longer trucks. FedEx's Maier said his company is basically throwing its lot behind a push to allow twin 33-foot trailers on federal highways, versus the 28-footers currently legal today.

Maier said there are many advantages to this change. Consumers on the road don't even notice the added length, he said, so there should not be much concern from that end. Evidence is that the longer trailers are safer and more stable, he said, and that the back trailer specifically is less prone to fishtailing. For those reasons, drivers actually prefer driving the longer trucks.

When questioned by someone in the audience about why not pushing for even longer trailers, “This is just something we believe can get done,” Maier said.


Any reaction to any of the comments from this NASSTRAC exec panel? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.

 


   
 

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