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Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All

From SCDigest's On-Target E-Magazine

- Dec. 19, 2012


Logistics News: Is the War on Trucking Being Waged?


Yes, Says Mike Regan, Though there is a Short Lull Right Now; Carriers Also Focused on Getting More Revenue Per Shipment, Increasingly Through Fees

SCDigest Editorial Staff


Mike Regan, president of TranzAct Technologies, active member of NASSTRAC, and notable commentator on the freight transportation sector generally, drew some notice in late 2010 by warning that there was an emerging "war on trucking" that should have not only carriers but shippers concerned.


SCDigest Says:

Regan believes shippers themselves also need to be concerned about growing carrier capabilities to drive more revenue per shipment.
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Those threats to transportation budgets and service included changes to Hours of Service rules, a trend towards increased highway tolls, the impact of CSA 2010 on driver availability, rail industry-backed sources fighting proposals to allow heavier trucks with an addition axle, other legislative proposals that would have actually decreased current maximum truck size and weight (SHIPA), and more.

So here in late 2012, is the war still in progress?

Changes were made this year to the HOS rules, which will go into effect on July 1, 2013, while the proposals to allow heavier and/or longer trucks were essentially defeated for now early in 2012. Looks like that stage of the war went against the trucking industry.

So what does the big picture battlefield look like now? We went back to get Regan's current perspective on this week's supply chain video news, produced in partnership between our Supply Chain Television Channel and CSCMP.

"The war is still going on, however I would suggest that instead of being phases of an active campaign, we are actually seeing a lull as things sort out. There are a lot of things happening in Washington DC that are taking precedence right now over things related to the transportation industry," Regan told SCDigest editor Dan Gilmore. "But I want to emphasize that these issues, it's not that they've gone away, it's just that they not getting the attention right now" given the election campaigns, the fiscal cliff, etc.

Regan believes, however, that when the new Hours of Service rules go into effect this summer, the impact is going to be significant, and that shippers are not paying close enough attention to this issue that can impact their costs and service from carriers.

Regan says he has been hearing analysis from truckload companies that show a significant loss of effective capacity when the HOS changes go into effect.

One truckload carrier told Regan they estimate a capacity loss of 7% in their tandem driver teams, and as much as 9-12% for single drivers. That will exacerbate a generally tight capacity environment already, and in the end increase rates by several percent as carriers pass on the costs of lower driver productivity and the cost of more trucks to fill the capacity gaps.

Regan said a friend that manages a large private fleet estimates about a 6% effective reduction in capacity from the new rules.

A Fight over Independent Contractors?

Regan also said he believes the IRS will be taking a close look at whether independent drivers (owner-operators) should not be classified as contractors, but instead full-time employees.

Independents comprise an increasingly large portion of many carriers' driver pools, and numbered some 600,000 nation-wide in 2009 when there were Senate proposals to introduce legislation that would change the rules on this issue. The total number of independent's today is likely larger than that.

(Transportation Management Article Continued Below)



"If you move these drivers from independent contractors to full-time employees, the impact is going to be very significant" in terms of carrier cost structures, Regan said. The ramifications are clear: a change in status would force these independents to join the Teamsters in unionized carriers, and probably increase driver costs even in companies that aren't unionized in terms of benefits and other costs.

Fighting such a change is currently the top legislative priority of the Owner-Operator Independent Drivers Association (OOIDA), Regan said.

Regan also said he expects renewed efforts by the Federal Motor Carrier Safety Administration (FMCSA) to require trucks to install electronic on-board recorders. While many carriers support this move and/or have already deployed the devices, such a requirement will add to a carrier's investment cost, and in practice (right or wrong) probably lead to a loss in productivity as drivers will no longer be able to sometimes skirt speed limits or HOS regulations.

Regan also said that despite some continued optimism on the part of the Coalition of Transportation Productivity that there is still a path for the move it has been pushing to allow a total weight increase for trucks from 80,000 to 97,000 pounds with the addition of an sixth axle, for the time being the opportunity is basically dead for now after it was tabled for further study in Congress earlier this year.

Ditto with legislative proposals to allow the length of double trailers to increase from 27 to 33 feet.

Together, these issues would tremendously improve trucking productivity, take trucks off the highways, and largely eliminate the growing driver shortage crisis, many in the industry say.

"The challenge is you basically have to educate a whole new set of legislators" who sit on key committees relative to this issue, Regan said.

Carriers Getting Smarter about Driving Revenue from Shippers

The issues discussed above are all of a government/regulatory nature. Regan believes shippers themselves also need to be concerned about growing carrier capabilities to drive more revenue per shipment.

For example, he said conversations he has had recently with executives at LTL carriers has indicated that there is a growing focus on maximizing the revenue per each trailer.

"If effect, what we do is sell space," he said one LTL CEO recently told him.


Mike Regan Said War on Trucking in Lull, to Resume

Soon, on this Week's Supply Chain Video News


That in part means LTL carriers will increasingly be implementing "dimensional weighing" programs similar to what has occurred in small parcel shipping by UPS and FedeX. The goal will be to see if a given shipment has been properly classified - and if not, change that classification, and hence the rate. Cube will not be just assumed to be accurate based on the class.

Regan also said that in both the LTL and truckload segments, carriers keep developing better and better data capture and processing systems, and will be focusing on increased accessorial fees to reflect the full set of services they are providing shippers.

He said the trucking industry is looking closely at what is happening in the airline market, and how air carriers have been able to rake in tens of billions of dollars in new revenue through fees for baggage, preferred seating, and other services.

Carriers are also getting smarter about declining "bad freight" that they can't move at a solid profit.

Gilmore summed up the conversation this way: "Sounds like we have a brief truce in the war on trucking for now, but that hostilities are likely to resume early in 2013, and that shippers have a lot to be concerned about in the way carriers are getting smarter and smarter - adopting some practices in other areas of transportation, to drive more revenue out of each shipment."


How do you see these threats to the trucking industry? Are carriers getting smarter about extacting more revenues per shipment? Let us know your thoughts at the Feedback section below.

Recent Feedback

This was very well said and I honestly believe we will have an ugly economic time late next year.  You have it right on every area. Thank you.

James Ray
Shipping Matters, LLC
Dec, 19 2012

It's about time carriers are re-examining how to get extra revenue from a shipper on a shipment. A shipper should pay for a truck when it has to sit for 2-3 hours waiting to load or unload. Also, if a shipper wants a carrier to leave empty trailers at the shippers' location, then the carrier should charge a daily rental fee for the trailer when it is not in use. 

Adrian Vecchiarelli
Adrian Vecchiarelli
Dec, 22 2012