A Look into Trucking’s Future

It’s a boom year for trucking, with demand outstripping capacity by a wide margin. Yet concerns remain: record high fuel prices, a shortage of drivers and security issues. To attain some perspective on where trucking is headed from here, Fleet Owner spoke with James Latta III vp-development of A. Duie Pyle, a leading regional LTL carrier and one of the few of such operations to remain family-owned.

FO: What are the major growth opportunities for carriers going forward?

A growing economy and tight transportation capacity creates a host of opportunities for all transportation service providers. However, I would not want to be a non-asset based logistics services provider today without very strong bilateral relationships with my current carriers. Given growing capacity issues, I believe you will see carriers more selective in terms of their selection of transportation intermediaries, and I believe this will result in consolidation of logistics service providers.

Also, in this emerging era of insufficient transportation capacity, I believe corporate boardrooms will very quickly realize the potential impact transportation has on their operations. Consequently, I would envision the management of this function coming in-house where it can be better managed rather than outsourced.

Does it make sense for large corporations to spend hundreds of millions of dollars on marketing, advertising, research and development and packaging and then to outsource and/or pinch pennies on the supply chain processes and personnel that support manufacturing and insure quality delivery of finished goods to the all-important customer? The wild card for all transportation service providers is the remarkable increase we have seen in offshore sourcing over the last few years. This will continue to have a profound impact on all forms of transportation and their traditional markets and business plans.

Are high fuel prices really hurting carriers or are they able to adequately cope via fuel surcharges, higher rates and other tactics?

Coping with higher costs of operations including fuel is a challenge for every industry and every company in America. Fuel is one of the three most significant costs we as an LTL carrier incur, accounting for over 5% of operating expense, with personnel and insurance being the other two most significant costs.

Fuel is also one of our most volatile cost components, and without an understanding customer base which supports the necessary weekly adjustments to the fuel surcharge schedule, I am afraid the trucking industry as a whole would be in serious trouble.

As a Northeast regional carrier serving all the major high-cost NE metros such as Boston, New York City, Albany, Cleveland, and Philadelphia, Pyle is particularly impacted by the congestion and complexity of traffic in these areas. As evidenced by the Qualcomm data we receive from our NYC metro drivers, these drivers average under seven mph during the course of their runs – not a very efficient use of fuel or driver time.

How bad is the driver shortage? Do you think LTL carriers are better able to recruit drivers than other trucking businesses?

There is a very real shortage of qualified, quality drivers. I do believe LTL carriers have a little bit easier time recruiting drivers than TL carriers due to the nature of the job as LTL drivers are generally home at the end of their shift. However, like most regional industrial freight carriers, Pyle employs only Class A drivers who are hazmat-certified.

Mature, seasoned Class A drivers with hazmat certification are in particularly short supply. In order to augment our external recruiting, we have established our own truck driving school. We recruit driver prospects from our warehouses, our terminal operations, and we accept referrals from current Pyle associates. We pay these trainees during the eight weeks of intensive classroom and behind-the-wheel training, assist them in taking the CDL test, and provide driver trainer mentors for the first few months of their career with Pyle. To date, premature attrition from this pool of in-house trained drivers is under 3%.

How concerned are you about the 2007-2010 emission regulations and their impact on truck performance, fuel economy and overall cost?

If the results of the EPA ‘02 regulations are any indicator of what we can expect from the future regulations, then I am concerned. The ‘02 regulations resulted in a minimum increase of 9% in new truck costs and a 10% reduction in engine fuel efficiency.

Considering that our country is at war right now and considering the impact fuel supply and cost have on our economy, I struggle to understand the impetus the government has for rigidly following pre-9/11 timetables. If your house were on fire, would you continue to re-caulk the bathroom tiles or try to put the fire out?

There is considerable concern about further fuel mileage degradation on the 2007 and 2010 engines. This must be weighed realistically against the benefits of marginally cleaner air. At this time, we are also being asked to fight a global war on terrorism in a region where fuel is a prominent and exposed resource and when fuel cost is obviously vital to our economic health. Should this not be considered when prioritizing environmental issues?

It is also obvious from our experience in 2002 that the new engine mandates distorted the supply and demand cycles for truck buyers and manufacturers which certainly imposed a needless cost on all parties and our economy. Do we really need this now in a time of war? Cannot the timetables be adjusted to fit the realities of the current situation in the world?

What has been the impact of the greater focus on security in trucking? Are you operating your business differently since the 9/11 attacks?

I wish someone could measure the total cost of 9/11 on our society. Certainly, we in transportation have been impacted significantly. I remember the problems we had as a hazmat carrier dealing with multiple daily traffic inspections of the same vehicle in the weeks following 9/11.

It was not uncommon for the same vehicle to be stopped and inspected three and four times in one day by the NJ State Police, Port Authority, NYC Police, and the NY DOT. Given the circumstances, there were a lot of very nervous security officials and uncoordinated procedures, and the redundancy of security checks was an added inconvenience and cost for all carriers who serve metro areas.

Like all carriers, we swallowed the added costs and did all we could to support the security and safety of our fellow citizens.

Our company has taken a five-pronged approach in evaluating and enhancing our security precautions and consciousness since 9/11:

  1. Personnel security: We have reviewed background and pre-employment check procedures and enhanced, as needed, any pre-qualification requirements. All current and new drivers are thoroughly trained and periodically reviewed for correct security procedures and each driver carries a picture ID.
  2. Facility security: We requested and underwent a Department of Defense inspection that assisted us in identifying potential improvements in facility security at our warehouses and trucking terminals.
  3. In-transit and route security: We ensure that every LTL unit (linehaul and pickup & delivery vehicle) is safely and securely parked at one of our lighted, fenced and gated terminals in the Northeast when the driver goes off duty. Overflowing public truck stops and unsecured “drop yards” are not an option for our LTL drivers as we have spent the money to position terminal infrastructure throughout our service areas.
  4. Perpetual in-transit visibility: At Pyle we employ Qualcomm satellite technology interfaced with our systems and the Internet to give us, and our customers, the ability to monitor the location and status of every shipment. This includes the capability for our customers to communicate via the Internet directly with our drivers and with our system for truck locations, estimated time of arrival (ETA), and notification of delivery.
  5. Education and awareness: We invited the FBI anti-terrorism taskforce to address all our sales and operational personnel. This presentation heightened our internal awareness and commitment to be proactive in protecting the products entrusted to us. It also informed our people about the procedures to follow if suspicious activity is encountered or noted. We have also assisted the FBI in training 12 of their taskforce agents in certain aspects of motor vehicle security. We support and encourage the policy of enduring vigilance.
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