Is US trucking reaching the tipping point?

By: | Issue #674 | at 08:05 AM | Channel(s): Intermodal News  Road  

The U.S. trucking industry is under stress, that’s a given. Driver shortages, ELD regulations, traffic congestion, environmental standards, safety and a boom in demand are just a few of the stress points facing the trucking industry. Is technology the answer: maybe… or maybe not.

Stress Points.

From April 1, 2018, all commercial trucks must be equipped with electronic log devices, or ELDs. These electronically tally driving time, more accurately monitoring and enforcing hours behind the wheel and rest periods than do traditional logbooks.

The only exceptions are local carriers, vehicles built before 2000 and those trucks that have automatic onboard recording devices, which are given another 18 months to transition. Drivers caught, face being placed out of service for ten hours and possible fines.

While few would argue of its necessity for better road safety, the ELD could well result in decreased driver productivity, especially in some smaller trucking companies that have played fast and loose with paper logs. Already, say some firms, drivers are beginning to push back on how many jobs they’re willing to handle and the distance they’re asked to travel, concerned about being caught out when their road time runs out.

What’s more, according to the trucking data analytics firm DAT, 8% of those surveyed in late February had yet to install the devices and weren’t exempt from doing so. That works out to almost 150,000 truckers of the country’s 1.7 million heavy and tractor-trailer drivers.

The ELD has become yet another stress point for an industry already struggling with a capacity crunch and driver shortages. Those particular problems are likely to get more pronounced in the months and years ahead. All evidence indicates these issues are systemic, not temporary. And, while a rush to technology may help, it’s unlikely to solve all the industry’s woes, which are, at most basic, the result of having to deliver just too much stuff to too many places.

“We don’t see anything that will slow down” capacity issues, said Ken Kellaway, the president and CEO of RoadOne IntermodaLogistics, a specialist in intermodal transportation, with more than 1,200 tractors and drivers. “There’s nothing for me to believe they won’t become more acute.”

Moving freight in the United States continues to be highly trucking dependent. According to the American Trucking Associations’ annual survey, released in August, trucks carried 10.77 billion tons of freight last year, a 3.8% increase over 2016. Trucks carry 70.2% of all freight moved domestically. Revenue for the industry topped $700 billion.

A robust economy means that trucks must move more and more freight. According to ATA, January-July 2018 freight tonnage jumped by 8% over the similar period in 2017. In the next decade, the ATA predicts, the total amount of freight carried by truck, rail and air will increase some 37%.

It’s not just the sheer amount of goods moved, however, that bedevils the trucking industry. Instead, it’s the complicated patterns of modern commerce. Blame Amazon.

The Mall is Coming to you

More and more goods are being delivered to homes, with expectations of delivery time in hours rather than weeks. This last-mile delivery now dominates freight transport, its planning and its execution.

“The whole game is changing rapidly,” said Kellaway. “People aren’t going to the mall. The mall is coming to them.”

That doesn’t just mean, however, the phenomenal rise of last-mile delivery services, such as UPS and FedEx. It also means the decentralized inventory and shipping of those goods. Amazon, alone, now has more than 75 distribution centers in North America. Other companies, which historically may have had three to five warehouses nationally, are doubling or tripling that.

Congestion only makes matters worse, whether it be in and out of the ports or on the roads. According to some in the industry, truckers have cut back distances traveled in a day by 10-20%. A Texas A&M University Transportation Institute study in 2015 pegged the road congestion delay costs for trucks at $24.4 billion a year.

Add to that the need for more trucks. “Today’s transportation ecosystem is covering more miles with fewer vehicles,” concluded a Deloitte study last year.

Buoyed by more demand for their services and higher freight rates, many trucking firms are ordering new tractors and trailers. At the same time, some trucking firms are opting to replace their equipment every three to four years, instead of the industry average of seven to eight years. By doing so, companies are “able to significantly reduce the running costs of the asset, and able to introduce newer technologies and safety components,” said Brian Holland, the president and CFO of Fleet Advantage, a Fort Lauderdale, Florida-based data analytics, leasing and private fleet management company. He adds that “having newer trucks helps with driver recruitment, it also helps with a technician shortage.”

This July, North American fleets ordered a record-setting 52,400 Class 8 trucks, according to ACT research. “The feat is made even more spectacular since July is typically the weakest order intake month of the year,” said ACT vice president Steve Tam, in a statement.

This year promises to be the biggest year in fleet truck purchases since at least 2006, although the spike in demand has caught the industry, equipment manufacturers and just about everyone else by surprise. Orders are now backlogged until the first quarter of 2019, as truck manufacturers and the complex supply chain necessary to provide various components struggle to catch up.

Trucking Frenzy

“There does seem to be a frenzy right now,” said Holland. “I’m not sure that anyone expected [demand] to be this strong. The industry forecasts at the beginning of the year were aggressive but not as aggressive as we’re seeing today.”

Meanwhile, a growing shortage of truck drivers plagues the industry. ATA said the driver shortage reached 50,000 by the end of 2017. “If current trends hold the shortage could grow to more than 174,000 by 2026,” said Bob Costello, the association’s chief economist, in the report.

Many drivers are reaching retirement age and they’re just not being replaced fast enough. That new-entrant shortfall reflects everything from a full economy providing less demanding and more lucrative alternatives in construction and manufacturing to driving opportunities for Uber and Lyft, with far fewer barriers to entry and far less regulatory oversight. Long- and medium-haul driving is losing out to heightened demand for local delivery.

On many fronts, the trucking industry is struggling to catch up. Data analytics and onboard technology help ease that struggle. “Innovation changes everything,” said Holland. “As distribution continues to evolve, new equipment, new technology will continue to evolve as well.”

Truck technology, for example, can help with driver shortage. It can make the job more profitable. “If you can drive more revenue to the vehicle by improving efficiencies with the help of technology, it can help the capacity issue,” said Kellaway. “More drivers will be attracted to the business.”

Younger drivers are more accustomed to technology; many demand it. “As you have migration to younger drivers that appear to be more concerned with technology and safety, having equipment that’s more attuned to their preferences benefits,” said Holland.

Can Technology Save Trucking?

However, most experts warn not to place too much hope that new technology will be the silver bullet that will overcome all the trucking issues. Advances in technology can certainly make trucking more efficient, but they don’t radically change the system.

Platooning is a good example. The Silicon Valley startup Peloton Technology is developing a cloud-based technology that allows two trucks to platoon in such a way that the rear truck stays at an optimal distance behind the lead. The company claims the two trucks can combine to save on average 7% of fuel costs. That’s substantial, but not game changing. And, say those in the industry, the technology is only good on the open road, not in crowded highways such as those found in the Northeast.

Despite all the hype, don’t expect self-driving trucks to transform the industry anytime soon. They must overcome not just technological challenges, but acceptance as well, and not just among regulators or fleet owners. Take, for example, insurance. Insurance today is on average 5% of the cost of goods sold for most trucking companies, said Kellaway. Double that and you’ve wiped out a trucking company’s profit margin, which is also 5%. “If anyone tries to implement autonomous vehicles until it’s fully vetted and the safety record stands strong, it’s going to be almost unfeasible from an insurance standpoint,” said Kellaway. “Who’s going to write insurance for a company that says there’s no truck driver in the truck?”

American Journal of Transportation