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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What Do You Say?
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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.
