The truckload sector of the freight industry is different from the LTL and small parcel segments in two significant ways. Unlike the other two segments, anyone who can buy or finance the purchase of a tractor-trailer unit and can drive the rig, can enter the industry. Freed from the requirement to build cross-dock facilities and/or buy sorting machines, the barriers to entry are low.

There are approximately 540,000 truckload carriers registered with the Federal Motor carrier Safety Administration in the United States. These range from 1 truck to 20,000 truck fleets. The majority have less than 20 pieces of equipment in their fleets. These companies are projected to generate $358.6 billion in revenue in 2018. The comparable Canadian number would probably be in the range of ten percent of these numbers. The truckload sector is about ten times the size of the LTL sector.

Revenue/Tonnage Growth in 2018

The following is my annual report on the state of the LTL Freight Industry in the United States and Canada. Here are links to the top 100 carriers in Canada (https://www.todaystrucking.com/top-100-ranking-canadas-largest-hire-fleets/ ) and the top 25 LTL carriers in the United States (https://www.logisticsmgmt.com/article/the_top_25_trucking_and_less_than_truckload_ltl_companies_in_2017 ). The combined revenue of the 25 largest U.S. LTL trucking companies remained unchanged at $31.8 billion in 2015 and 2016, according to The Journal of Commerce’s 2016 ranking of the Top 25 LTL Carriers, prepared by SJ Consulting Group. In 2017 annual revenues grew by 7.8% to $34.5 billion.

The Booming Freight Market of 2017 - 2018

Freight volumes are strong as we approach mid-year. Carriers, hampered by a lack of drivers and faced with new time constraints due to mandatory electronic logging devices (ELDs) in the United States, are increasingly being selective in picking the best-yielding freight for their freight lines. LTL carriers are picking up volume from the tightening TL market. Some large TL carriers started rejecting lighter loads of 5,000 pounds to 10,000 pounds earlier this year, and that freight is now moving via LTL carriers. The net result is LTL freight base rates are soaring with some experts projecting increases of 4 to 5 percent or more. In addition, LTL carriers are doing a better job quoting accurate dimensional pricing and accessorial charges which also places upward pressure on rates. This environment will likely continue for the remainder of this year.

The LTL Industry remains a Non-Union “Big Boys” Game

Last week’s TruckWorld event at the International Centre in Toronto was a great opportunity to connect with old friends and get updated on the state of the freight transportation industry. It was clear from the huge attendance at the show that is a very good year to be in trucking. The negotiating leverage has clearly swung over to the carrier side. Shippers are being told to accept rate increases or risk losing their truck capacity to other manufacturers and distributors.

One trucking company owner summed up the state of the industry this way. The industry is facing four problems: drivers, drivers, drivers, and drivers. This caused me to reflect on what various trucking companies are doing to address this issue.

Signing Bonuses

Companies are offering from $2000 to $10,000 bonuses to experienced (one year plus) drivers.

Under the Federal Motor Carrier Safety Administration rules in the United States, that came into effect on Dec. 18, 2017, most trucks built after 2000 had to be equipped with an ELD (Electronic Logging Device). Fleets already using older electronic onboard recorders are grandfathered until December 2019.

The CCMTA (Canadian Council of Motor Transport Administrators) is coming forward with a Canadian ELD Mandate proposal. The Canadian ELD rules will closely mirror the US mandate to keep cross-border regulations consistent.

Regardless of when the Canadian government publishes the final rule on ELDs, which will likely be within the next year, any driver operating a commercial motor vehicle south of the border is already required to follow U.S. Hours of Service rules and regulations. Canadian carriers that make cross-border deliveries were also required to have an ELD solution by the December 2017 deadline.

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.

Five years ago, I posted a blog that was derived from a LinkedIn Sales Management Group. A range of people responded to the question, “What advice would you give a new salesperson?” To that list, I added my own observations.

While many sales techniques stand the test of time, others evolve based on changes in technology and culture. This updated list of tips is designed for two sets of users, new reps, and their managers.

1. Achieve mastery of the services that you sell and understand how your services compare with those of your competitors.

2. Achieve mastery in sales skills. Observe how top sales people perform their craft. Seek out constructive feedback on your sales skills. Work on those areas of your sales skills that need improvement.

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.

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.

Investopedia defines Blockchain as a distributed database that holds records of digital data or events in a way that makes them tamper-resistant. While many users may access, inspect, or add to the data, they can’t change or delete them. With Blockchain, transactions agreed by consensus are added to a block, a unique cryptographic code is calculated of the block, and that code is added to the following block creating a unique chain of blocks containing all the transactions.

The so-called distributed ledger is a technological system that is an asset database that can be shared across a network on multiple sites, geographies, or institutions. The original information stays put, leaving a permanent and public information trail, or chain, of transactions. The decentralized and distributed digital ledger contains transactions across many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. In short, Blockchain is a record-keeping mechanism that makes it easier and safer for businesses to work together over the internet.

The most popular application of Blockchain technology is Bitcoin, the currency system. The good news is that the Blockchain protocol can be used for non-currency purposes as well.

Though it was initially intended for financial transactions, businesses of all kinds are getting creative with the so-called Blockchain ledger, as it can be used to record, track, and verify trades of virtually anything that holds value. From ride-sharing to cloud storage to voting, companies in all industries are beginning to see blockchain’s potential. Earlier this year, consulting firm Deloitte predicted that by 2025, 10% of global GDP (approximately $12 trillion) would be built on top of Blockchain applications.

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.

The truckload sector of the freight industry is different from the LTL and small parcel segments in one important respect. Unlike the other two segments, anyone who can buy or finance the purchase of a tractor-trailer unit and drive the rig, can enter the industry. Freed from the requirement to build cross-dock facilities and/or buy sorting machines, the barriers to entry are low and there are thousands of truckload carriers throughout North America. Nevertheless, the industry has had its challenges over the last couple of years.

Revenues Dropped in 2015 and 2016

Here are links to the top 100 carriers in the United States (http://resources.inboundlogistics.com/digital/trucking_top100_chart_0916.pdf ) and Canada (http://www.todaystrucking.com/top100 ). The top 50 truckload carriers in the United States are listed in the March 20, 2017 issue of the Journal of Commerce. Altogether, the combined revenue of the Top 25 Truckload Carriers dropped 1 percent last year, to $26.9 billion, after falling 2.3 percent, to $27.1 billion, in 2015.

Swift Transportation, Schneider National, J.B. Hunt Transportation Services, Landstar System and Crete are the five largest US based carriers; TFI (formerly TransForce International), Mullen Group, TransX, Trimac Group and Bison Transport are Canada’s largest truckload carriers. It should be noted that TFI now derives roughly 50% of its revenues from the United States.

Revenue declined last year at 15 of the companies on The Journal of Commerce’s Top 25 US Truckload Carriers rankings, according to SJ Consulting Group, which prepared the data. That’s an improvement compared to 2015, when revenue fell at 19 companies. As an indicator of the weakness in pricing last year, the Cass Truckload Linehaul Index, a measure of truckload pricing excluding fuel surcharges, turned negative in March 2016 and declined for 11 straight months.

The big news on the LTL scene in Canada over the past few weeks has been the severing of ties between Estes Express, the number 14 ranked carrier (on the Transport Topics list) in the United States and TST Overland Express, a large Ontario-based LTL carrier that is one of the major divisions of TFI International (formerly known as TransForce), Canada’s giant trucking conglomerate. This is a partnership that has endured for many years.

Estes Express Lines will be teaming up with two regional Canadian less-than-truckload carriers to offer LTL freight services to Canada under an Estes freight bill. Estes will be working with Speedy Transport of Brampton, Ontario, and Pacific Coast Express Ltd. (a division of the Landtran Group) of Surrey, British Columbia, to offer Estes Canada service. The new alliance will start May 22, according to Estes.

The company stated that U.S. shippers will work with only one carrier, Estes, from pickup to delivery, and all freight will be delivered on an Estes delivery receipt. In effect, Speedy Transport and Pacific Coast Express will become agents of Estes. When asked what drove the need for Estes to convert its Canadian service to a direct model, Ed Alderman, Vice President, International and Offshore Sales for Estes, said Estes wants customers to have the same quality Estes customer service experience from shipment to delivery as they have come to depend on domestically.

As reported in Transport Topics, Estes said it is forming dedicated account teams in Canada to provide the same service level that U.S. customers receive. Freight will move across the border in Estes pup trailers equipped with captive beams and Estes’ proprietary Webb walls. This direct method of cross-border shipping is meant to reduce handling of freight and decrease risk of damage, the company said.

There are approximately 3.5 million professional truck drivers in the United States, according to the American Trucking Association; there are an estimated 250,000 professional truck drivers in Canada (source: Toronto Globe & Mail). This places the position of truck driver among the most common professions, at least for men, in North America. The cost of these drivers represents one of the largest expense items for most trucking firms.

There are a host of initiatives taking place in North America and Europe to partially or fully replace truck drivers with a set of technologies that have come to be known as autonomous vehicles. In addition to cost, this new set of technologies offers a range of benefits.

“Automated vehicles have the potential to save thousands of lives, driving the single biggest leap in road safety that our country has ever taken,” stated former U.S. Transportation Secretary Anthony Foxx. Approximately 35,000 people died in roadway collisions in 2015 and 94 percent of the crashes “can be tied to a human choice or error,” according to the Department of Transportation.

The projected shortage of truck drivers, that is expected to reach hundreds of thousands of positions in 2025, provides further incentives to get robots in the driver’s seat. There’s a huge advantage in getting automated drivers, who can work 24 hours a day, involved in those deliveries, and improving logistics for companies.

The following is my annual report on the state of the LTL Freight Industry in the United States and Canada.

Revenues Stagnated Again in 2017

Here are links to the top 100 carriers in Canada (http://www.todaystrucking.com/top100) and the top 25 LTL carriers in the United States (http://www.joc.com/sites/default/files/u48801/truck-tables_1_0.jpg).

This will likely be an eventful year in Freight Transportation. As I look ahead to the coming year, there will be two sets of forces at play. The President-Elect of the United States, Donald Trump, has made some bold promises. This blog will look at the potential impacts of his presidency. The next blog will examine some of the other major forces at play.

Infrastructure

Donald Trump has spoken repeatedly about improving America’s highways, bridges, and airports. The Transportation industry has bemoaned the lack of investment in infrastructure for several years. It is likely that at least some elements of whatever plan President Trump’s team puts forth will receive bi-partisan support from the other branches of government. 

It typically takes time to plan significant infrastructure projects so they reach “shovel ready” status. In addition to improving the nation’s infrastructure, these projects also create jobs, albeit over a specific timeline. Watch for some infrastructure projects to be launched in 2017 with the balance moving forward in the coming years. These projects should be a net positive for the transportation industry. However, keep in mind that some of these projects, such as toll roads, may receive some funding from private industry (if permitted by congress) and may result in higher costs for shippers and transport companies.

The North American Free Trade Agreement (NAFTA), came into effect on January 1, 1994, creating the largest free trade region in the world. It was designed to generate economic growth and help raise the standard of living for the people of all three member countries.

“By any measure the NAFTA has been a success by serving as a basis to grow both trilateral and bilateral North American relationships and the results speak for themselves. This integration helps maximize our capabilities and make our economies more innovative and competitive. In 1993, trilateral trade within the North American region was over US$288 billion. In 2015, our total trilateral merchandise trade amounted to over US$ 1.0 trillion.” (Source: Government of Canada Global Affairs Canada website). This is a more than threefold increase since 1993.

During the recent US election, Bernie Sanders and Donald Trump frequently spoke about the need to renegotiate NAFTA. They commonly highlighted the impact that “bad trade deals” as they were framed, had on American industry. As the election campaign unfolded, Hillary Clinton fell into line with her opponents on this issue. While the subject of renegotiating NAFTA has come up before, this time will likely be different. Here’s why.

Donald Trump has already stated that one of his major priorities is to create jobs in America. He campaigned with the slogan “Make America Great Again.” A big part of making America great again is bringing back jobs that were lost to other countries. This message resonated strongly with working class people living in “rust belt” states. In fact, the race for the Presidency was decided in Michigan, Ohio, Pennsylvania and Wisconsin. These states turned their backs on the Democrats and voted for Donald Trump. To maintain the support of working class Americans in these states, Mr. Trump will have to demonstrate that he is trying to bring back jobs to these states. To better understand the challenges of people living in cities in this area, who have lost their jobs, I encourage everyone to read Hillbilly Elegy by J.D. Vance (see my blog on the book http://www.dantranscon.com/index.php/blog?view=entry&id=253 ).

This is the sixth and final blog in this series on surface freight transportation within Canada and between Canada and the United States. In this blog I will focus on tips for carriers to help achieve success in the Canadian freight market.

Is the Canadian Freight Market Worth the Investment?

As outlined in the first blog in this series, Canada is a large country, from a geographic perspective, with a population about the size of the state of California. The first question that any American carrier should ask is whether or not Canada is worth the investment in time and resources. As outlined through this series of blogs, when dealing with Canada, there is much to learn about Canadian laws, customs clearance, exchange rates and a host of other issues. Is serving the Canadian market of strategic importance to your company or would another US market (or foreign market) be more profitable? If there is value in the Canadian market, there are a series of steps that need to be undertaken.

Educate yourself on your Canadian freight activity and Canadian carriers

This is a follow up to the blog on “Passion” (http://www.dantranscon.com/index.php/blog/entry/passion ) that was posted here a few weeks ago and is published in the current issue of Canadian Shipper. While the blog on Passion was inspired by Bernie Sanders, this blog was inspired by Lin-Manuel Miranda, the author and star of the hit Broadway play “Hamilton.”

On Sunday night, during an interview on Sixty Minutes, Lin-Manuel and his parents were asked by Charlie Rose about their son’s early school experience. Mr. Miranda mentioned that he was sent to a school for gifted children. At first he felt intimidated by the school and the intelligence of his fellow class mates. Mr. Miranda then mentioned that once he found “his lane,” or calling at the school, Music, he felt totally comfortable with the institution and his career path.

Hamilton, based on the life of former U.S. treasury secretary, Alexander Hamilton, is the hottest play on Broadway. On Sunday night it earned 11 Tony awards, the second best performance ever for a new play. Mr. Miranda created a brilliant hip-hop musical to tell this story. Some critics are calling Hamilton a trans-formative play that will have lasting effects on the future of Broadway.

Lin-Manuel Miranda was very fortunate to find his “lane” as he described it. Not everyone does. It is interesting that by finding his lane, Mr. Miranda was able to reach extraordinary heights in his career. Here are some thoughts on the key steps in finding a successful career lane.

Every few years I like to take a look at the segment of the freight industry where I got my start, the LTL sector. As I reviewed the landscape for this year’s blog, I am struck by the significant changes taking place in both the United States and Canada.

Revenue Growth Stagnated

Here are links to the top 100 carriers in Canada (http://www.todaystrucking.com/top100 ) and the top 25 LTL carriers in the United States (http://www.joc.com/sites/default/files/u48801/truck-tables_1_0.jpg ). The strong surge in revenue that less-than-truckload carriers enjoyed in 2014 stalled last year, as weaker demand and lower fuel surcharges dragged down LTL trucking’s top line. The combined revenue of the 25 largest U.S. LTL trucking companies declined 0.5 percent in 2015 to $32.1 billion, after shooting up 9.1 percent to $32.3 billion in 2014, according to The Journal of Commerce’s 2016 ranking of the Top 25 LTL Carriers, prepared by SJ Consulting Group. The report concludes that the decline in revenue may have as much to do with falling fuel prices as lower industrial demand.

The LTL Industry has become a “Big Boys” Game

As we approach 2016, there are a number of forces that are shaping the economics of Freight Transportation. Here are a few to consider.

The US Economy and the US Dollar

The US economy is providing a number of mixed signals in December of 2015. Unemployment is at only five percent. Economic growth, while sluggish, has been able to generate a consistent 200,000 new jobs a month. But some other indices don’t look so good.

The Institute for Supply Management (ISM) PMI Index of economic activity in the manufacturing sector contracted in November for the first time in 36 months, since November 2012, while the overall economy grew for the 78th consecutive month. The November PMI® registered 48.6 percent, a decrease of 1.5 percentage points from the October reading of 50.1 percent and below the 50 percent mark that signals growth. The New Orders Index registered 48.9 percent, a decrease of 4 percentage points from the reading of 52.9 percent in October. The Production Index registered 49.2 percent, 3.7 percentage points below the October reading of 52.9 percent. Ten out of 18 manufacturing industries reported contraction in November, with lower new orders, production and raw materials inventories accounting for the overall softness in November.