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The implementation of the FMCSA’s ELD mandate in the United States on December 18 was one of the most anticipated milestones in the history of trucking. The introduction of electronic logging devices is the latest attempt by the FMCSA to improve road safety and minimize road accidents in the United States. Driver fatigue is believed to be the biggest cause of road accidents. The FMCSA had previously specified Hours of Service (HOS) rules and regulations that limit how many hours a driver can drive in a day.

However, the problem is that Hours of Service were recorded with paper logs and, therefore, could be easily manipulated and falsified. ELDs are designed to eliminate paper logs and record driver duty statuses and HOS information automatically. Moreover, they are supposed to be tamper-resistant, so the recorded information cannot be altered by anyone.

Late last year, pre-mandate, the smaller fleets were wary of the decrease in miles per day and thereby the reduction in their profit margins. The word on the street was that there would be an exodus of smaller trucking companies when the regulations came into force.

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Recruiting and retaining qualified drivers has been a challenge for several years. Many young people do not wish to spend so many hours away from friends and family. The Hours of Service and ELD mandates make the job more difficult from a work enjoyment and compensation perspective. They cap the number of hours a driver can work and thereby limit their incomes. As the U.S. government ramps up its ELD enforcement efforts, this will likely encourage some drivers to find another source of employment.

The strength of the U.S. and Canadian economies is placing pressure on the limited supply of drivers. Employment levels in America are at record highs. Two sectors of the economy that serve as alternate sources of employment for drivers are manufacturing and construction. Both areas are also on a growth spurt. The rebuilding efforts after the two major hurricanes in the southern U.S. have provided an added boost in demand for people willing to work in construction.

The driver shortage problem in North America has been studied for years. “Blue ribbon panels” have been created to find solutions to this chronic problem. Some of the challenges are well known.

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Periodically, business conditions change. These changes can have positive or negative effects on certain sectors of the freight transportation industry.

Intermodal transportation uses at least two modes of transportation (i.e. road, rail) to move freight. The intermodal option works best when the rail service provider has terminals within a fifty-mile radius of the origin and destination points and on major long haul (i.e. over 1000 mile) lanes. While intermodal volumes have grown over the past couple of decades, this business remains a niche market. The typical road/rail combo service is usually a few days longer than over the road transportation, but it is normally priced a few percentage points below truck service. This may be a pivot point for intermodal. Here’s why.

The US and Canadian Domestic Intermodal Freight Markets

Two hurricanes in the southern US and solid economic conditions in Canada and United States have been driving a tightening of trucking capacity. As it tightens, intermodal service can be an option on some freight shipping corridors. Shippers often look to intermodal service for lower freight costs. As truck capacity shrinks and spot market rates rise, this may create an impetus for shippers to migrate some traffic from road to rail.

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Driving a transport truck is one of the most prevalent jobs in North America and throughout the world. There are about 3.5 million truck drivers in the United States; the comparable number for Canada would be in the range of 350,000 people. Truck drivers are mostly men who like a life on the open road, crisscrossing the freeways and city streets of America. These are folks who are away from home for long stretches of time, as they go from state to state, province to province, sleeping in cheap motels or in their sleeper cabs, eating unhealthy meals in Truck Stops and spending long, lonely hours driving their rigs.

Young people seeking to enter the profession need to take a set of courses so they learn safe driving techniques and how to manage their rigs. For those individuals who wish to run their own businesses, they can become owner-operators. They can work for themselves or for one of the thousands of trucking companies throughout North America. This can include working for a for-hire fleet or for the private fleet of a manufacturer or retailer.

Despite the relative ease of entry into the profession, there is a shortage of truck drivers in North America. Driving a truck is a tough job. Bad weather, traffic, and road conditions create difficulties on a daily basis. A lack of investment in infrastructure throughout North America creates congestion and impedes productivity. Driving a tractor-trailer unit with a 45,000-pound payload requires full concentration throughout the period they are on the road.

For many people, being away from home for blocks of time is not glamorous or fun. For someone with a young family, missing family occasions and their kids’ baseball or soccer games does not help maintain positive personal relationships.  While much has been done to raise the quality of the profession, truck driving does not command the respect it deserves; it remains a relatively poorly paid job.

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As the year 2013 winds down, it is time to reflect on the major transportation trends of the past year.  While I saw and read about a wide range of developments, these are the ones that resonated most with me.

1.Technology Comes to Freight Transportation

Last year I predicted that we would see a flurry of new technologies come to freight transportation.  They did and I wrote about some of these new companies on several occasions during the year.  Technology was successfully applied to the freight brokerage business, freight portals, LTL density calculations and to other segments of the industry.  Buytruckload.com, PostBidShip, Freightopolis, QuoteMyTruckload,  and Freightsnap were featured in various blogs during the year.  They are changing the way business is done in freight transportation.  Watch for more of these companies to surface in 2014.

2013 has been called the Year of the Network by numerous supply chain and transportation industry thought leaders.  Companies that built a successful supply chain trading partner network focused on three elements:

Connectivity— unite disparate systems and trading partners

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At the end of each year, I like to take stock of the major freight transportation stories of the past twelve months and look ahead to the trends that will drive the industry in the coming year.  The two blogs that I write are prepared from my perspective as a consultant to shippers and carriers.

This year I would like to hear from you.  Those of you who follow this blog observe trends in your segment of the industry.  Please take a minute to share them with me.  Please post them on this blog or send a private e mail to dan@dantranscon.com

Please feel free to select any major trend or trends that are having or will have a major impact on our industry, whether regulatory, economic, technological, demographic, consumer behavior, environmental, modal shifts or business strategy.

To broaden the range of inputs and perspectives, I will also post this request on Facebook, LinkedIn and Twitter.  In the coming weeks I will be preparing my two lists.  The lists will include a blend of my observations and yours.  Look for these two blogs in mid-December.  Thank you to those of you who take the time to share your observations with me.

 

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Last week the Council of Supply Chain Management Professionals released its 24th annual State of Logistics Report. Last year, business logistics costs were once again 8.5 percent of U.S. Gross Domestic Product (GDP), the same level they hit in 2011, the new report says. That means freight logistics was growing at about the same rate as the GDP. Inventory carrying costs and transportation costs rose "quite modestly" in 2012, said the report's author Rosalyn Wilson. Year-over-year, inventory carrying costs (interest, taxes/obsolescence/depreciation/insurance, and warehousing) increased 4% y/y as inventory levels climbed to a new peak. Meanwhile, transportation costs were up 3% y/y predominantly from an increase of 2.9% in overall truck transportation costs.

This "new normal" is characterized by slow growth (GDP growth of 2.5% to 4.0%), higher unemployment, slower job creation (which will primarily be filled by part-time workers due to higher healthcare costs), increased productivity of the current workforce from investment in machinery/technology (and not human capital), and a less reliable or predictable freight service (as volumes rise but capacity does not increase fast enough to meet demand). Wilson noted that slow growth and lackluster job creation has caused the global economy to wallow in mixed levels of recovery. "This month will mark the fourth year of recovery after the Great Recession, and you're probably thinking that here has not been much to celebrate," said Wilson. "Is it time to ask, 'Is this the new normal?'"

For logisticians, the "new normal" means less predictable and less reliable freight services as volumes rise but capacity does not. In areas such as ocean transport, Wilson said, this can mean slower transit times. "I do believe the economy and logistics sector will slowly regain sustainable momentum, but that we'll still experience unevenness in growth rates," Wilson predicted.

For cutting-edge logistics managers, however, the current environment also means great opportunities to secure increasingly tight capacity in an era of shrewd rate bargaining. This is partly because the trucking industry, in particular, is facing a lid on capacity because of higher qualifications for drivers while top carriers are becoming increasingly selective in their choice of customers and in the allocation of their assets.

"Truck capacity is still walking a fine line—few shortages, but industry-high utilization rates," Wilson explained. Truckload capacity continues to remain stagnant (with the majority of new equipment orders for replacement or dedicated fleets and the copious amount of truckload capacity sapping regulations coming down the pipeline) and the assumption that freight demand will continue to modestly increase (as the economy continues to muddle along at low single digit GDP growth in combination with population growth), a less predictable and less reliable freight market is developing (as described in the "new normal").

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I have been writing a blog on the transportation industry for five years.  During this period I have received hundreds of postings and e mails from readers.  Every now and then I receive an e mail that stands out.  This week I received a thoughtful and interesting e mail and article from a truck driver, David Robson.  In the article, he shares his thoughts on what trucking companies can do to improve driver retention and increase trucking company profits.  With permission, here is an edited version of the article.

 The Future of the Professional Driver

“I was looking up the top 50 trucking companies and reviewed a few of the well-known companies CSA scores from the FMCSA website.  I was surprised and disappointed with what I saw.  Many of these carriers advertise on the backs of their trailers, “We hire only safe and professional drivers.”   If you saw their CSA scores I would think that the owners would be embarrassed to display those signs.  Perhaps the owners are not aware of their scores.

The first thing I noticed was that many were near the 60% intervention score. The other common factor involved “Subject to Placardable HM Threshold.“

I found some violations that were commonly high among most of the carriers.

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