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The latest demise of the owner-op, via the WSJ

Sept. 25, 2015
To borrow from Mark Twain, the reports of the demise of the owner-operator have been greatly exaggerated. Well, somewhat, anyway. So it’s not likely a surprise to many American Trucker readers, but The Wall Street Journal this week found it worth reporting: The trucking business is increasingly stacked against small operators.

To borrow from Mark Twain, the reports of the demise of the owner-operator have been greatly exaggerated. Well, somewhat, anyway.

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So it’s not likely a surprise to many American Trucker readers, but The Wall Street Journal this week found it worth reporting: The trucking business is increasingly stacked against small operators while large, well capitalized fleets are positioned to manage costly regulations and expensive equipment, leverage scale and scoop up market share.

“A recovering U.S. economy is driving record demand for trucking,” the WSJ piece, by supply chain and logistics writer Loretta Chao, opens. “But many smaller operators, who make up the vast majority of the roughly 470,000 for-hire fleets on the road today, say they’re missing out on the boom.”

Chao throws in some big-picture numbers and trucking’s corresponding growth during the economic recovery. She also notes rising operating costs, including regulations such as driver hour limits and emissions caps, along with driver recruitment and retention.

“Small and midsize trucking companies are finding they are ill-equipped to adapt,” the story says, citing research by Avondale Partners that shows hundreds of carriers with an average fleet size of “about a dozen vehicles” have gone out of business in the past two years. And others have sold out, typically to larger competitors with the cash or credit “to weather changes in the industry.”

Among truckers quoted in the story, Jim Burg, who owns a 90-truck flatbed carrier, explains that his fleet hasn’t grown in three years because of the high cost of new equipment—and he’s turned down business rather than take the risk of expanding.

Meanwhile, the largest fleets boast of their new equipment and driver pay increases.

And pending regulations, specifically the e-log mandate, will force more small fleets out of the market, the story explains, quoting a veteran owner-op.

“Everybody’s quitting, all us old-timers are done. We’re done with the regulations,” says Eric Peterson, who drove his truck for 17 years but couldn’t keep up with his expenses, and now works for an hourly wage with a local carrier.

Comments on the story, predictably, pointed to the hazards of government interference with business.

“To paraphrase an old medical joke' The operation was a success, but, the patient died'!” commented one reader. “The regulations were a success but the industry died.”

One reader also noted that large 3PLs contribute to the struggles of small truckers by relying on only the largest carriers, while another suggested that opportunities remain for owner-ops with the “technical and management skills” to cope with the regs and bureaucracy.

I’ll try to find the tank half full: The marketplace is too diverse and fluid, and there will always be a need for owner-operators to handle freight that’s too complicated or too far from the major lanes for the big carriers to mess with. More importantly, it will be all the more important for independents to adapt.

Modern computing and telecommunications systems also will be critical and affordable management tools for keeping the small truck competitive. For the Davids out there, this tech could be your slingshot.

The real challenge will be equipment costs, and I’m not sure the solution there—other than for owner-ops to take very good care of what they’ve got—and get you’re rates right. Cheap freight won’t pay for a new rig.

Thoughts?

About the Author

Kevin Jones 1 | Editor

Kevin Jones has an odd fascination with the supply chain. As editor of American Trucker, he focuses on the critical role owner-ops and small fleets play in the economy, locally and globally. And he likes big trucks.

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