Tuesday, November 17, 2009

Shippers, Carriers Project Growth Problems

Surge in 10 months could challenge capacity, cause driver shortage

Shippers and carriers expect there will be sufficient capacity in the domestic transportation system to handle the modest growth in traffic that will occur in the coming year, but eventually there will be a day of reckoning marked by driver shortages, higher fuel prices and capacity constraints.

Although traffic volumes were soft most of the year, a seasonal spurt in activity is underway and Schneider National is projecting that its volume in November will be higher than in November 2008, said David Howland, vice president of rail management.

Schneider expects transportation activity to "bounce along" for the next 10 months, followed by a rebound in August 2010, Howland said.

He addressed the annual transportation conference sponsored by the Intermodal Association of North America, the National Industrial Transportation League and the Transportation Intermediaries Association in Anaheim, Calif.

The domestic transportation environment in the current economic recession is defined by idle trucks and rail equipment, a surplus of truck drivers and furloughed rail industry workers. If modest growth occurs next year, BNSF Railway will have no trouble handling the increased work load, said Barry Russell, general director of marketing.

While Russell's views were echoed by the trucking sector, some shortcomings are noticeable that could present problems in later years. Fleet managers noted that their drivers' average age is in the low to mid-50s.

Also, so much capacity has been idled that a recent brief surge in activity strained truck and driver availability, said Wayne Johnson, director of logistics at American Gypsum.

Shippers and carriers also anticipate continued volatility in fuel prices, with the trend being toward higher prices as developing nations increase their consumption of petroleum products.
Although it may take some years, truck and rail traffic will return to the high volumes of 2006-07, and will continue growing beyond those levels. "When this industry takes off, it will be challenged to handle the load," added Gary Palmer, senior director of transportation at True Value, the hardware company.

One of the solutions offered by shippers was to encourage introduction of larger equipment such as 57-foot trailers and containers that will foster improved productivity.

Carrier executives do not favor that approach, noting that the pricing premium they might realize initially will soon disappear and their large capital expenditure to purchase new equipment will not pay off.

"When we went from 48-foot to 53-foot equipment, it didn't take long to go back down to 48-foot prices," Howland said.

Source of article: The Journal of Commerce


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