Tuesday, December 6, 2011

Trucking Capacity for 2012

Trucking Capacity Has Been Tightening, but Why?

Most transportation managers now understand that it is a different world today as compared to a year ago, when trucks were more plentiful. Have you had loads sitting waiting for a truck to appear for days??

Many transportation managers have felt this during 2011. So why has this been happening when all we hear about is the economy being sluggish?

The simple answer comes down to two words...... Driver Shortage. Many drivers are approaching retirement age and there don't seem to be enough new ones coming aboard. But is that all???

You'll want to listen to Jim Watson, the Driver Recruiting manager for Schilli Specialized, Wabash Valley Transportation and WVT of Texas. Jim has been with the trucking industry for numerous years and has one of the best handles on driver issues of anyone around.

Yes - CSA 2010 has helped to keep our roads safer. But it is costing transportation divisions a lot more money to get freight moved, as transportation providers are struggling to keep enough drivers moving their trucks.

Monday, November 28, 2011

Transportation Costs in 2012 - Could They Explode?

Transportation Costs Have Been On the Rise - What About a Rail Strike in 2012?

There have been some major concern of U.S. workers in contract negotiations with railroad companies. There was a December 6th, 2011 deadline that if an agreement could not be reached, there would be a massive rail shutdown.

There has been a recommendation that the 132,000 negotiating workers reach tentative agreements to end a two year stalemate between workers and railroads. Unions that do not reach an agreement by December 6th may begin strikes and the railroads can lock them out.

According to the Association of American Railroads, a walkout on December 6th would cost the American economy approximately $2 Billion a day.

The Good News

The good news is that one of the unions that represent approximately 19 percent of U.S. workers still negotiating their contracts, said that it would like to continue talks at least through February

“We have no intention of striking” on Dec. 6, said Fred Simpson, president of the Brotherhood of Maintenance of Way Employes, which represents workers who build and maintain tracks and other structures. “We sent all the railroads a letter saying, ‘We’re not going to strike, we’d like to bargain until Feb. 10 to see if we can get something done.’”

Impact on Trucking Costs

Of course, any reduction in the supply of transportation means an increase in other sectors, such as truckload. Normally products and goods are shipped at a much lower rate across country when rail is used. Once the products are shipped to the rail yards, they are normally finalized by trucks.

Think about the impact, for example, if coal fired power plants cannot ship their coal via rail. The price of electricity would obviously go up considerably. How about the price of automobiles? Most autos are shipped via rail across the US then finished with car carriers. The impact on the auto industry could also be significant.

Companies would be forced to utilize long haul trucking to get their goods to their customers or face severe financial hardships. This would also drive the transportation costs "through the roof" as the simply rules of supply and demand dictate higher prices when more demand is placed on a commoditized service, such as transportation.

For now, it appears that the railroad strike may be averted. Let's keep our fingers crossed that a settlement can be negotiated - our county would have a difficult time rebounding from the past recession should this important part of the shipping equation shut down.

Thursday, November 17, 2011

Trucking Capacity... Better or Worse for 2012?

Trucking Capacity for 2012 Is On Every Transportation Manager's Mind
Let's face it... many companies are reviewing budgets for 2012 and transportation costs are one of the largest expenses any manufacturing or distribution company has. Trucking capacity is one of the biggest issues in transportation pricing.
Here are some articles around the globe that should give you a pretty good idea of what is going on and what is expected to go on in regards to the supply of drivers in the transportation industry. We may be able to make equipment, but it's hard to get a truck to move without a driver.
Click on any of the links below to read more.

Panelists agree driver shortage is 'going to get harder' | Truck Parts ...
The Aftermarket Authority – Truck Parts and Service.

Driver Shortage, Tight Fleet Capacity Fuel Growth of Intermodal ...
By Rip Watson, Senior Reporter, Transport Topics The truck driver shortage and related fleet capacity constraints are driving strong growth in domestic.

FTR: Capacity to remain tight, driver shortage to worsen ...
FTR: Capacity to remain tight, driver shortage to worsen. By Jeff Crissey. Published November 8, 2011. During a presentation at Commercial Carrier Journal's Fall Symposium in Scottsdale, Ariz., Eric Starks, president of FTR Associates, told ...

Where are all the great tank truck drivers? - Modern Bulk Transporter
Where are all the great tank truck drivers?Modern Bulk TransporterThe continued driver shortage may very well be the most critical factor in the future success of tank truck fleets. Even with unemployment well above 9% and despite hefty hiring and re ...

Mike O'Connell on the Truck Driver Shortage
CVTA's Executive Director Mike O'Connell on the push to increase the number of truck drivers in the US

The driver shortage is already a factor in rising transportation costs. According to the experts above, it is likely to become a much larger problem for 2012.

Thursday, November 3, 2011

How the Global Economy Can Affect Trucking Capacity

The Global Economy Directly Affects Trucking Capacity

It's safe to assume that most transportation managers have felt the "sting" of a tightening truck capacity in the full truckload world. Flatbeds have been hard to find - rates have been increasing. Vans have also tightened and rates have increased.

Bottom line - if you want to attract a truck, it's probably going to cost you more than it did a year ago.

So what is driving the demand for trucks? Let's start with manufacturing and see what is happening.

Even though the global economy is playing a more critical role than ever before, such as the deficit crisis in Greece, freight demand has continued to be brisk, due to a bounce back of manufacturing activity.

According to data by the National Association of Credit Management (NACM), manufacturing increased in September from a dissapointing showing in August. The Credit Managers’ Index (CMI) jumped from 57.2 to 58.9. This seems to indicate that the summer slowdown appears to be lifting.

“The anecdotal evidence is that demand for new machinery is starting to pick up steam,” noted Chris Kuehl, NACM’s economist. “Many of the bigger trade shows in the manufacturing sector are reporting much larger attendance numbers than last year and those that are coming to these shows are far more interested in buying than before.”

That trend is reinforced by the CMI numbers, he added. “There is abundant evidence that business activity is ramping up again from the drops in August, and it is looking like much of the summer slowdown was prompted by all the political infighting,” Kuehl said.

Kuehl stated that the manufacturing activity isn't necessarily enough to indicate the manufacturing crisis is over, but that the manufacturing side of the economy is playing a big role in the freight markets.

"It has been noted elsewhere that outbound container traffic is about 8 points higher than this time last year, indicating that the export sector is still performing well in many categories,” he said.

According to a recent article in Fleet Owner, "the key “poker piece” for trucking in all of this is that capacity still remains well short of freight demand, Kenny Vieth, president and senior analyst at ACT Research Co., told Fleet Owner. “As long as freight volumes exceed capacity, then trucking companies can still achieve a reasonable profit,” he said. “Though we’ve changed our forecast, with freight demand now expected to plateau rather than accelerate into 2012, that plateau will still produce enough freight to exceed capacity. That means trucker profits should still remain up.”

For example, it has been reported that the number of trucks operated by the truckload industry is still down about 12% from the height in late 2006, yet tonnage levels are about the same as in late 2006; thus capacity remains tight.

According to Vieth, Greece still remains a wild card. The impact upon the world economy when Greece defaults could have a substantial impact on not just the eoncomy worlwide, but that also means that trucking capacity could be affected - just not sure how just yet.

Wednesday, October 19, 2011

Forecast Manufacturing - Where are We With Trucking Costs?

Forecast for Manufacturing - Will Truck Prices Continue to Rise?

According to a report from KPMG, the global forecast manufacturing outlook is "growth while managing volatility".

OK - so what does that mean??

Here's an exerpt from their recent whitepaper:

Despite a generally profitable year, many leaders of global manufacturing firms face a
number of challenges. Just as the global economy looked like it was gaining momentum, the Japanese tsunami struck, unravelling many global supply chains. Since then, volatility has become a key watchword, as a wide array of macroeconomic risks – most notably the European and US debt crises – raise uncertainty over future demand and the spectre of a “double dip” recession.

Yet executives at major manufacturers – organizations polled in an Economist
Intelligence Unit survey representing firms with at least US$1 billion in revenue – are cautiously optimistic that they can realign their businesses toward top-line growth while managing the multitude of cost challenges.

It appears that KPMG's survey is indicating that there is still some optimism in the global economy that manufacturing will continue it's upward trend.

Of course, as this relates to transportation costs, the more demand that is placed on a constant supply can, and probably will, put upwards pressure on prices.

Click here to download KPMG's report, "Global Manufacturing Outlook - Growth While Managing Volatility"

Tuesday, April 19, 2011

Trucking Economy Still Growing

The trucking economy of the US is still growing. Shipping managers have all known that it is harder to find trucks, but will this continue?

Below is an excerpt from the Institute for Supply Management and indicates that the ISM's index continues to grow.

(Tempe, Arizona) — Economic activity in the manufacturing sector expanded in March for the 20th consecutive month, and the overall economy grew for the 22nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Norbert J. Ore, CPSM, C.P.M., chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The recent trend of rapid growth in the manufacturing sector continued in March, as the PMI registered above 60 percent for the third consecutive month. The component indexes of the PMI remain at very positive levels and signal strong sector performance in the first quarter. While manufacturers are benefiting from strength in new orders and production, there is significant concern with regard to commodity prices. Many manufacturers indicate the prices they have to pay for inputs are rising, and there is concern about the impact of higher prices on their margins."


Of the 18 manufacturing industries, 15 are reporting growth in March, in the following order: Apparel, Leather & Allied Products; Transportation Equipment; Fabricated Metal Products; Machinery; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Printing & Related Support Activities. The two industries reporting contraction in March are: Wood Products and Primary Metals.

  • "Customer orders have picked up nicely. [This is] likely in anticipation of increasing prices due to commodity costs that will likely happen over next month." (Food, Beverage & Tobacco Products)
  • "New orders continue at a robust pace this month." (Miscellaneous Manufacturing)
  • "What will be the impact to the U.S. supply chain after the devastation caused by the Japan earthquake?" (Chemical Products)
  • "The building side of our business is mired with little hope of a rebound anytime soon." (Fabricated Metal Products)
  • "Steel and certain steel products causing concern over price increases and availability." (Machinery)
MARCH 2011



PMI 61.2 61.4 -0.2 Growing Slower 20
New Orders 63.3 68.0 -4.7 Growing Slower 21
Production 69.0 66.3 +2.7 Growing Faster 22
Employment 63.0 64.5 -1.5 Growing Slower 18
Supplier Deliveries 63.1 59.4 +3.7 Slowing Faster 22
Inventories 47.4 48.8 -1.4 Contracting Faster 2
Customers' Inventories 39.5 40.0 -0.5 Too Low Faster 24
Prices 85.0 82.0 +3.0 Increasing Faster 21
Backlog of Orders 52.5 59.0 -6.5 Growing Slower 3
Exports 56.0 62.5 -6.5 Growing Slower 21
Imports 56.5 55.0 +1.5 Growing Faster 19
OVERALL ECONOMY Growing Slower 22
Manufacturing Sector Growing Slower 20

*Number of months moving in current direction.

For a link to the actual article, click here.

Monday, April 4, 2011

Truckload Freight Rates

Truckload freight rates have been going up - quickly. Since transportation costs are a large portion of expenses for most manufacturers, many shippers are wondering if rates will continue to increase or will it level off?

According to Mark Montague, a pricing analyst for TransCore, "While the spot market reacts more severely, the contract market has a lot of room for recovery of rates."

He mentioned that spot market rates have increased 8.9 percent year over year in January. Contract rates were up 3.4%

David Schrader, senior vice president at TransCore Freight Solutions stated "We've seen a material increase in the load-to-truck ratio. In December 2009, we had three loads for every truck posted, and by November 2010, it was about five loads for every truck. January was the strongest January in quite some time."

Longbow Research states that rate recovery is already underway and they predict that contract rates may rise up to 10% in the first half of 2011 - and that trucking companies may still come back for more.

Another part of the capacity crunch is that carriers are not willing to add trucks to their fleets. "There are a lot of barriers to growing capacity at the rate of a potential recovery, which means spot market rates could really climb." states Montague. "It will be more difficult given the tight credit markets to create capacity.

How Can Shippers Attract Trucks?

According to Tom Schilli, CEO of Schilli Transportation Services, Inc., "Other than price or rate, there are two ways that shippers can attract trucks - making sure your facility is driver friendly and carrier cash flow."

On driver friendly facilities, Schilli states, "No dispatcher wants to argue with his drivers to go into a shipper that fails to treat them with respect. On the other hand, if a shipper treats drivers with respect, has a place to sit down while waiting to get loaded, and generally welcomes drivers, the dispatcher's job is much easier. Given equal rates, that shipper will receive trucks over the shipper who fails to respect drivers and waste drivers' time. Most contracts allow for two free hours to load or unload. Since drivers are paid by the mile, delaying a driver costs him valuable driving time and hits his pocket. However, if a shipper can get a driver in and out in only an hour, that driver has effectively made another $15. That driver is going to want to come back."

Schilli continues, "We encourage shippers to spend a little money to create good, driver friendly facilities. If they do, the drivers will be more apt to represent those shippers in a way that the shipper's customers will also appreciate."

Providing a place that is driver friendly is a great way to help to attract drivers, but it still comes down to the "boss" making a decision to send a truck in or not. Another way that shippers can attract carriers is to provide better payment terms. "A company that takes 45 days to pay a carrier is at a serious disadvantage to a shipper that pays in 7 days," states Schilli.

Schilli continues, "Many companies don't realize that smaller carriers are still feeling the credit crunch of the recent banking crisis. Large, publicly held trucking companies can borrow money the same as large manufacturers. The smaller, entrepreneurial companies, however, still have concerns over cash flow. If a shipper is willing to step up and make a quicker pay to those small and medium sized carriers, those carriers are much more likely to send their trucks to them versus another shipper. If companies can figure out a way in which to speed up their payments, carriers will respond."

We hope that this article will encourage shippers to help themselves as the trucking capacity crunch continues and is likely to worsen over the next few months.

Photo from TransCore - click here to visit TransCore site

Tuesday, March 1, 2011

Trucking Industry Trends for 2011

Trucking industry trends for 2011 should be on the minds of every transportation manager. How should you strategize for this year? Will you have to pay much higher rates to get your goods moved? Will you be able to find trucks? How will CSA 2010 affect 2011?

These are all great questions. I ran across a survey put out by the Commercial Carrier Journal that questioned 41 commercial carriers on various topics concerning the "pulse" of the industry.

Here is what was found:

How Is Your Business Doing This Month Compared to the Same Month Last Year?

12.2% feel it is the same as last year; 63.4% of the companies feel that business is better and 17.1% feel it is much better

In the Next 6 Months, We Plan to:

* Increase the size of our fleet 56.1%
* Replace aging equipment 26.8%
* Make no change in fleet 17.1%

Top Concerns

* Freight pricing 36.6%
* Labor availability 20.0%
* Freight volume 17.1%
* Regulation 9.8%
* Energy Costs 7.3%
* Cash Flow 4.9%

Interesting Comments
I am cautiously optimistic that current freight demand will continue at least through half the year in 2011. Biggest concern I have is that diesel fuel costs could get back to the over $4.00 range and kill the economy again.

I hope shippers are prepared, with the price of oil, CSA, HOS......only the ones that pay a fair rate will get service because those elements will cause capacity issues in the second half of 2011......if we don't have a double dip which i think is still possible.

December was much better than expected. We are now in the traditional post holiday lull in January. Once we get past 1st Q, I expect this to be a pretty good year. We made great progress in 2010 in raising rates, but need to start all over again in 2011 as I anticipated rising costs in drivers pay, recruiting, fuel, and loss of productivity caused by Federal Regulations.

Turning down available freight because not enough drivers available. My recruiting dept. states that as long as they can get $500 per week unemployment..... that the drivers say they'll go hunting and fishing!

Monday, January 17, 2011

Trucking Industry Trends - Diesel Costs for 2011

Trucking industry trends for diesel costs show that the global demand for diesel is far higher than the demand for gasoline. What does this mean for transportation managers throughout the US? You can read the article and judge for yourself.

Diesel Premium to Remain in 2011, Analysts Predict
By Dan Leone, Staff Reporter - Transport Topics

U.S. retail diesel has sold at a premium over gasoline throughout 2010, and petroleum market watchers saidglobal competition for the trucking industry’s main fuel likely means that will not change any time soon.

“There’s really one reason” for the spread, said Tancred Lidderdale, a Department of Energy economist. “Theglobal demand for distillates is rising faster than global demand for gasoline.”

Last week, the U.S. retail diesel average was 23.9 cents higher than the gasoline average. The spread narrowedsignificantly from just one week earlier as gas rose far faster than diesel, DOE reported Dec. 6.

The highest diesel premium so far this year came on Nov. 29, when diesel was 30.6 cents a gallon moreexpensive than gasoline. The gap had not been so pronounced since February 2009, according to DOE data.

Decades ago, diesel was a refinery byproduct and reliably cheaper than gasoline. Each successive federal cap onsulfur content for diesel resulted in higher refiner costs that got passed down the line to truckers.

Now, DOE data show, retail diesel is almost always more expensive than gasoline.

However, when DOE began its weekly survey of filling stations in 1994, diesel and gas prices tracked one anotherquite closely. It was not until 1996 that DOE’s weekly survey reported diesel prices were routinely higher thangasoline. The last time the diesel average stayed below the gasoline average for more than two consecutiveweeks was during the summer of 2009. Diesel has not been cheaper than gas since August 2009.

So far in 2010, the average spread between DOE’s weekly diesel and gasoline average has been 20.7 cents agallon, about in line with the agency’s 2010 estimate of 21 cents a gallon.

The latest official DOE projection for the 2011 diesel premium is 23 cents a gallon.

Diesel is coveted both by developed nations and industrializing giants such as China.

“In Europe or China, the growth in diesel fuel consumption is stronger and is expected to stay stronger thangrowth in gasoline consumption,” Lidderdale said.

“We’ve become a net exporter to these countries,” said petroleum analyst Phil Flynn, referring like Lidderdale to Europe and China.

DOE reported that distillate fuel exports for the week ended Dec. 2 were 777,000 barrels a day. That figure isunchanged from the prior four weeks, but it is more than 327,000 barrels a day higher than in the week endedJune 4, the earliest period for which data were available.

Europe has more diesel cars than the U.S., and China’s economy is recovering from the recession so quickly that,according to the most recent DOE data, year-over-year growth in demand for oil in that country was close to, orequal to, U.S. demand growth in August and September.

In those months, DOE estimated that the U.S. petroleum market processed 750,000 and 900,000 barrels,respectively. That level of demand growth was “approaching, or even exceeding, growth levels seen in China,”DOE said.

Chief among the domestic factors that contribute to the diesel premium are the United States’ ultra-low-sulfurdiesel fuel requirement and rising demand for diesel from U.S. buyers.
“Ever since we’ve gone to ULSD, that has always added to the premium,” said Flynn.

For a link to the article, click here.