VOL. 126 | NO. 25 | Monday, February 07, 2011
Distribution & Logistics
New Guidelines Have Trucking Industry Cautious
By Sarah Baker
Memphis’ location and infrastructure – its gateway to the west and within a day’s drive to a huge segment of the population – make it a critical distribution center and focal point for trucking.
But those assets could also make the city susceptible to product shortages. If fewer trucks are trying to serve more loads of freight than what the existing trucks can handle, then it will eventually prevent businesses from being able to move goods.
“Truck driving is a job that can never be outsourced and that the American economy literally rides on its backs to get low-cost goods moved from one place to another,” said Tommy Hodges, immediate-past chairman of the American Trucking Association and chairman of Shelbyville, Tenn.-based Titan Transfer Inc. (see story Page 3).
The U.S. Department of Transportation’s Federal Motor Carrier Safety Administration has started implementing CSA – formerly Comprehensive Safety Analysis 2010, the acronym was recently changed to mean Compliance Safety Accountability – which compiles safety records and features for drivers. Through its managing information system, regulations like hours of service and truck size and weight are forcing trucking companies to manage behavior on the front end rather than after the fact.
The hours of service component will change the way businesses make supply chain decisions, while trucking companies lose productivity.
“CSA is just another one of those things that’s coming down from an administration that’s bent on regulation, and it’s just going to make it that much more difficult for the trucking company to operate,” Hodges said.
Part of CSA is a call for additional equipment to be implemented – such as electric on-board recorders – that the trucking industry will have to compensate for by increasing its rates to cover the cost.
The module eliminates the 11th hour of driving by initiating a D-rate that gradually slows the truck down to the point where it cannot operate at all. It then sends a message back to the track control center, announcing a driver has been operating past his hours of operation, ridding both parties of free agency and trust.
EOBRs translate into multimillion-dollar investments and increased hiring at local trucking companies. While increasing truck tonnage is a positive sign, it also goes back to the notion that demand will outstrip supply.
The ATA’s advance seasonally adjusted For-Hire Truck Tonnage Index – which represents the change in tonnage hauled nationally – saw an increase of 5.7 percent in 2010 compared to 2009.
The latest improvement put the index at 111.6 in December, the highest level since September 2008. Hodges expects truck freight tonnage to grow between 5 and 10 percent in 2011.
Meanwhile, the not seasonally adjusted index – which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment – equaled 107.2 in December, down 1 percent from the previous month.
“Fleets continue to tell me that freight volumes are very choppy – up one week, but down the next,” ATA chief economist Bob Costello said in a statement. “That is a trend that is likely to continue this year as the economy is not growing across the board yet.”
Trucking provides an accurate gauge of the U.S. economy, representing 68 percent of tonnage carried by all modes of domestic freight transportation including manufactured and retail goods. In 2009, trucks hauled 8.8 billion tons of freight.
As the consumer feels more secure about his future, the more goods are going to start to move off the shelves. While ATA’s latest estimate reveals some 3.6 million trucks are on the nation’s highways, there are actually a whole lot more loads moving around than that, Hodges said.
As soon as spending starts to increase, replenishment of those inventories will create capacity issues for the trucking industry.
“We’ve just got to get back to where we can service our debt, interest costs and expenses so we don’t have all this empty space to have as an overhead that’s not producing any income,” Hodges said.
When the economy does pick up, as it is forecasted to over the next 12 to 18 months, Memphis will see a pretty significant driver shortage, said Cliff Lynch, principle for logistics consulting firm C.F. Lynch & Associates.
“Drivers simply won’t be able to stand up under the scrutiny they’re going to be getting,” Lynch said. “It’s going to hurt those trucking companies that are already in some cases having trouble getting drivers anyway because of the economy; a lot of drivers have left the driving work force and gone into other industries.”
Also during the downturn, a number of motor carriers have retired equipment and not purchased new equipment as rapidly as they have in the past.
“If business does pick up, some carriers aren’t going to have enough equipment to handle that,” Lynch said. “If you couple that with the driver shortage, and you’ll have carriers that have equipment but don’t have employees or drivers for the trucks, then we could see a shortage of service around the country.”