What Can Be Written About the Challenges Facing the U.S. Trucking

2008 TRUCKING PERSPECTIVES What can be written about the challenges facing the U.S. trucking industry that hasn’t already been chewed up and steamrolled over countless times? Rising fuel prices, green equipment mandates, shifting truckload (TL) and less-than-truckload (LTL) demands, mode competition, excessive capacity, and end-user demands have carriers checking their side-view mirrors for lost business, assets, and competitors discarded along the way. For an economy inherently tied to over-the-road commerce, these objects in the mirror are closer than they appear. Numerous failures, including Alvan Motor Freight and Jevic Transportation, have cast a pall over the trucking industry at large. But with time, distance, and perspective, carriers are managing these challenges and turning their attention to what lies ahead, chasing the tail lights of a sputtering economic engine that is showing signs of turning over. What hasn’t already terminally stalled truckers is making them leaner, greener, and better prepared for a return to normalcy. by Joseph O’Reilly

September 2008 • Inbound Logistics Stateside shippers and consignees navigate a less Figure 1 Reported Increases in predictable and potentially ominous road. Institutional Motor Carrier Sales and Profitability, 2007 fuel costs and the threat of a capacity crunch when the economy picks up raise red flags about their ability to Sales Proﬁts 2008 adapt and shift gears. Many motor freight carriers are 39% 39% restructuring go-to-market strategies, streamlining fleets, and investing in value-added logistics offerings; others 30% 26% are vanishing into a fuel-induced ether. For shippers, the consequences are clear: capacity is disappearing fast; 17% and working closer with carriers, identifying strategic 9% supply chain process improvements, and building long- term partnerships are critical priorities. Inbound Logistics’ annual Trucking Perspectives brings these two unique viewpoints under one

microscope. First, we polled motor freight carriers to 5% Increase Break-even 5% Increase Break-even 10% Increase or Decrease 10% Increase or Decrease find out how they are responding to market conditions SOURCE: Inbound Logistics Trucking Perspectives, 2008

PERSPECTIVES and shipper expectations, expanding and consolidating service offerings, geographical coverage, and IT capabilities to manage current and future demands. By contrast, 30 percent of surveyed carriers report Second, we canvassed motor freight buyers to identify profit growth at five percent, nine percent cite growth and comment on the challenges they face in today’s of 10 percent, and 39 percent indicate static or lost market as well as gauge their perspective on the profits. Importantly, eight percent of surveyed truckers importance of driving collaborative partnerships in the document losses in excess of 20 percent. face of cyclical economic U-turns. With diesel prices approaching $5 a gallon in certain Complementing this bilateral, end-to-end panorama of markets this past summer, dwindling access to credit,

TRUCKING the U.S. domestic trucking industry, our annual Top 100 and lower freight volumes, cost pressures throughout Motor Carriers list presents a data-driven drill down of the supply chain took their toll on motor freight carriers. carriers we deem the best at delivering the goods. From Trucking companies overwhelmingly cite rising fuel regional, refrigerated LTL players to asset-based global costs (91 percent) and price pressures from customers logistics service providers, our annual directory presents and competitors (70 percent) as their two greatest a diverse class of trucking companies that can go to the challenges. Last year, price pressures (79 percent) ends of the earth or deliver direct to home, with unique and rising driver-related costs (74 percent) were top service and speed demands in mind. concerns for carriers. At the same time, increasing consumer and regulatory Divided Highway Begins influences have legislated the trucking industry to Compared to previous years, shippers have had comply with new green standards. As evidence of markedly more leverage vetting and selecting carriers this emerging trend, 41 percent of carriers report given 2008’s soft market conditions. Sluggish environmental mandates – including new equipment, consumerism and freight demand have left plenty of speed restrictions, idling protocol, and bio-fuel capacity on the table, forcing many trucking companies usage – as a challenge, and 38 percent cite equipment to eat fuel and other operational expenses to attract costs as an obstacle they face. Insurance and liability existing and new business. costs (39 percent), driver-related costs (35 percent), and Building on last year’s data, when recessionary taxes, fees, environmental, regulatory, and compliance indicators began to manifest themselves in earnest, cost increases (26 percent) round out top concerns. this trend is borne out in a visible disconnect between While freight demand has waned and temporarily carrier sales and revenue growth. Thirty-nine percent mitigated capacity and labor shortages, fuel surcharges of surveyed trucking companies report growing sales by are equal-opportunity discriminators, impacting large five percent, compared to 48 percent of respondents and small carriers alike. Smaller companies, however, last year; 17 percent increased sales 10 percent (26 have far less critical mass and resources to absorb percent in 2007); and 26 percent indicate break-even or or pass along rampant price hikes compared to larger negative growth (see Figure 1). operators that can flaunt value-added service offerings

Inbound Logistics • September 2008 as collateral. Regional and local Figure 2 Did you switch taking advantage of these third- haulers face the unenviable task carriers recently? party networks to identify more of eating fuel costs and profits competitive rates, as well as pick up simply to keep shippers in sight and backhaul capacity in markets with 2008 competitors at bay. a considerable imbalance between Still, more carriers documented inbound and outbound freight moves. price pressure as an outstanding 51% 49% Such a changing dynamic may also concern last year amid fears that an No. Yes. suppose that opportunities to find impending economic downturn might better pricing (through brokers) give shippers more incentives and have momentarily trumped speed fewer reservations to shop around for and reliability (working directly with better freight pricing. This may have carriers) as primary considerations. simply been a gut reaction that never For example, businesses that have

materialized as shippers became Figure 3 Which is more important greater visibility upstream in the acclimated to market conditions. to you, your relationship supply chain may be leveraging this Alternatively, it might suggest with your carrier or with control to more cost effectively and

PERSPECTIVES some carriers have found success your broker/intermediary? efficiently match speed-to-market convincing customers to consider the demands with available capacity. efficacy of long-term partnerships The fact that brokers say they can rather than short-term, price-driven 30% generally handle a wider variety of hookups. Regardless, this remains an Equally freight and are better attuned to ongoing challenge for carriers. important 53% the overseas freight segment may In fact, shippers are more likely to Carrier provide shippers better service switch carriers than they were last 17% and incentive than common carrier year, according to IL’s poll. Nearly Broker/ representatives, according to one TRUCKING half (49 percent) acknowledge intermediary shipper respondent. making a change recently, versus Despite this anomaly, the majority 45 percent in 2007, and less than SOURCE: Inbound Logistics of surveyed shippers still value direct Trucking Perspectives, 2008 40 percent in 2006 (see Figure 2). One relationships with carrier partners. “I respondent reports that his company don’t like to use brokers because I dropped a carrier after it changed the freight class on cannot get the service I need from them. I have a supplier a frequent order, then retroactively re-billed for past that uses a broker and it continually scrambles to cover invoices. Those that changed trucking companies cite our loads,” explains another shipper. “When I deal poor service, high prices, and more innovation by other directly with a carrier I have access to a management carriers as a primary reason for making a swap. With team that has ownership in our mutual success.” transportation prices as they are, reliability and service While current market conditions favor shippers in expectations have risen accordingly, and carriers that terms of vetting carriers per their own price and service can’t deliver have become disposable assets. requirements, an economic rebound will likely push control back to the trucking industry. Over the past few Point of Interest years, carriers and shippers have taken turns playing Another interesting trend line diverging from last the collaboration card as supply chain bullwhips such year’s data is a growing shipper preference for brokers. as capacity, labor, and pricing oscillated according to While freight transportation buyers still overwhelmingly economic cycles. A sharp decline in available assets value their relationships with carriers (53 percent), has shippers wary of what freight capacity will be like this represents a near double-digit drop from 2007 when volumes pick up, with 61 acknowledging this as a (see Figure 3). In turn, 17 percent report a higher regard for relevant concern. By comparison, 70 percent of carriers partnerships with brokers/intermediaries (five percent in believe their customers are aware of this emerging 2007), and 30 percent (32 percent in 2007) perceive capacity pandemic – which reflects their sales pitch to both relationships as equally important. new and existing customers alike. Brokers generally prove their worth when capacity Convincing customers of how important it is to is tight. But in a flush market shippers are similarly establish partnerships for the long haul is “the toughest

Inbound Logistics • September 2008 Figure 4 Truckers provide varied services Other carriers perceive this challenge as an opportunity to generate new 78% SOURCE: Inbound Logistics business while building more grounded Trucking Perspectives, 2008 partnerships. “The ability to cross-sell

2008 66% 61% in both directions – vendor to customer, 58% customer to vendor – brings long-term 53% 50% benefits,” says one survey respondent. 43% While freight rates still remain a make-or-break deal for many shippers, carriers are expanding their operational 25% range and service capabilities to extend 20% value beyond pure pricing. In terms 17% 17% 15% 12% of geographical coverage, U.S.-based trucking companies are expanding 4% beyond borders with 39 percent serving all of North America, versus 33 TL LTL DCC Bulk PERSPECTIVES percent last year. This trend reflects Package Tank Car Expedited Intermodal Final Mile Refrigerated White Glove the growing importance of NAFTA Logistics Services Household Goods trade, Mexico and Canada’s developing Motor Vehicle Carrier roles as manufacturing and distribution conduits, and demand for integrated job we have,” notes one carrier. “The current business trucking services throughout the continent. Also of climate does not allow for long-term collaboration note, seven percent of carriers identify themselves unless the customer can secure long-term, depressed as “international” in scope. Larger players continue rate assurances.” Trucking companies are therefore to acquire assets in other global markets (China, for

TRUCKING challenged with helping customers see partnerships for example) to diversify their business interests and what they are not – a commodity that can be bought and provide U.S. shippers and consignees with end-to-end sold on the spot. transportation capabilities and reach. The demands of the current domestic marketplace similarly reflect some nuanced changes in the types of transportation services truckers are 0ROVIDING4RANSPORTATION building into their networks. A decline in -ANAGEMENT6!,5% freight volume and poor economic climate ISOUR0RIORITY have forced some carriers to streamline s,OGISTICS/UTSOURCING their fleets and invest in non-asset-based s4RANSPORTATION-ANAGEMENT infrastructure enhancements, including s0$)%$'%4ECHNOLOGY value-added services driven by technology s,OAD#ONTROL#ENTER innovations. The average fleet size among s/PTIMIZATION carrier respondents fell to 2,725 trucks this s0OOL$ISTRIBUTION year, compared to 2,946 trucks in 2007. s-ULTI -ODAL3OLUTIONS The lion’s share of U.S. motor freight s,OGISTICS4RANSPORTATION carriers (78 percent) still provide truckload (TL) services. (see Figure 4). This reflects a s&REIGHT"ROKERAGE3ERVICES slight downward turn from last year (81 percent) and is indicative of current price pressures moving long-haul cargo via road, #ONTACTUSAT the increasing efficacy of rail/intermodal SOLUTIONS PDIPLCOM solutions, and a shift in DC network WWWPDIPLCOM designs to capitalize on shorter LTL moves. In turn, the number of trucking

Inbound Logistics • September 2008 companies providing LTL and Figure 5 How carriers capture shipments, 66 percent of carriers intermodal services grew slightly, track and trace information employ satellite devices such as with 53 percent and 43 percent of 66% GPS units, while 45 percent rely respondents, respectively, providing on cellular phones, and 12 percent 2008 these types of offerings. As further and four percent, respectively, use evidence that some shippers are bar codes and RFID (see Figure 5). 45% shifting heavier cargo to rail, the Complementing this in-cab percentage of truckers offering bulk connectivity, trucking companies transportation capabilities dropped are similarly “amping up” their to 15 percent, compared with 25 front-facing technology dashboards, percent in 2007. developing demand-driven services Beyond commodity-type 12% and Web portals to give shippers transportation management 4% and consignees greater control services, motor freight carriers are and visibility into transportation meeting customer demands for decision-making. RFID more specialized, time-sensitive Satellite For example, 87 percent of Cell phone Bar Code

PERSPECTIVES offerings as well. Sixty-six percent SOURCE: Inbound Logistics Trucking Perspectives, 2008 carriers provide Web track- of carriers provide logistics services, and-trace and 80 percent offer 58 percent expedited shipment capabilities, 20 percent email alert capabilities, empowering customers to be white glove services, and 25 percent final-mile delivery preemptive and proactive in dealing with exceptions or options. conveying shipment information to consignees. Sixty-six percent of survey respondents give users logistics Web Demand Signals Ahead, Pass with Care tools such as activity management reports and online Buttressing this value-added, go-to-market strategy claims filing, while 40 percent offer online pricing/routing is an arsenal of technology-driven solutions carriers are capabilities.

TRUCKING bringing to their trucks and terminals to help bolster real- Compared to last year’s data there has been a time communication and visibility between customers considerable uptick in the number of carriers offering and drivers. SKU/pallet-level RFID support, with 20 percent In terms of connecting with fleets and drivers in the acknowledging such capabilities (11 percent in 2007). field, cell phones remain the option of choice, with 77 Meanwhile, 39 percent of trucking respondents provide percent of carriers using them for voice communication bar-code support at the SKU/pallet level, a notable and 49 percent for texting purposes. Satellite messaging jump from last year’s 31 percent. Bar-code applications, is fast gaining traction among carriers with 67 percent of however, may be nearing the end of their shelf life as respondents reporting its use, compared to 61 percent only 21 percent of truckers indicate their potential as a one year ago, while satellite voice communication is future investment, compared to 34 percent that have less utilized (19 percent). To capture data and track RFID on the horizon. n

While carriers may be reflexively looking backward conducting personal interviews via phone and e-mail. to keep tabs on their assets, shippers are well advised IL’s annual Top 100 list offers a uniform guide that to consider what lies beyond the bend, as well as the dually reflects the diversity of the U.S. motor freight trucking partners that can capably carry their loads and market and the unique demands of over-the-road expectations into the future. shippers, featuring large LTL and TL carriers with global The Top 100 Our Top 100 Motor Carriers list is a good reach and regional owner/operators with specialized Motor Carriers place to shift gears and scope out trucking services. companies that are paving new roads for Together, our Trucking Perspectives industry overview 2008 delivering your goods to market and new and in-depth Top 100 Motor Carriers list provide a holistic pathways of innovation that provide the necessary perspective of the trucking industry, from demand to visibility and control your supply chain demands. IL supply, and all editors pared down this year’s roster by evaluating points in between. nearly 200 surveys, poring over online research, and

Inbound Logistics • September 2008 THE TOP 100

TECHNOLOGY SERVICES DRIVER VISIBILITY ONLINE / WEB MOTOR PRIMARY TYPES OF SERVICE COMMUNICATION SUPPORT & CAPTURE SERVICES 2008 CARRIERS CELLULAR SATELLITE

COMPANY NAME OPERATING ON-TIME FLEET NUMBER OF UNION PUBLIC OR

WEB ADDRESS PHONE AREA(S) LTL Truckload Package Expedited Services Logistics DCC Intermodal Goods Household Bulk Carrier Vehicle Motor Refrigerated Car Tank Glove White Final Mile SPECIALIZATION DELIVERY SIZE TERMINALS STATUS PRIVATE Voice Text Voice Text Phone Cell Satellite Codes Bar RFID Codes Bar SKU/Pallet RFID SKU/Pallet Track/Trace Web Alerts E-mail Pricing/Routing Web Tools Web Logistics

A. Duie Pyle US only l l l l l l General 99.1% 810 16 N PRIV l l l l l l www.aduiepyle.com 800-523-5020

AAA Cooper US only l l None 97.0 % 2,126 81 N PRIV l l l l l l www.aaacooper.com 334-671-3153

National and international transport ABF Freight System North America l l l l l l l l l l l DNR 4,000 290 U PUB l l l l l l www.abf.com 479-785-8700 solutions

Dry van, pad wrap, flatbed, furniture Anderson Trucking North America l l l l DNR 1,200 8 N PRIV l l l l l l www.ats-inc.com 800-328-2307 consolidation

Arnold Transportation US/Mexico only l l l Retail/paper products 98.0% 1,450 6 N PRIV l l l l l www.arnoldtrans.com 800-388-8320

Arrow Trucking US/Mexico only l Steel commodities/FAK 95.0% 1,400 6 N PRIV l l l l l www.arrowtrucking.com 800-759-2009

Averitt Express North America l l l l l l l l All markets DNR 4,150 100 N PRIV l l l l l l l www.averittexpress.com 800-AVERITT

Air freight, consumer products, food/ Barr-Nunn Transportation US only l l l l 98.2% 653 4 N PRIV l l l l l www.barr-nunn.com 515-999-3018 grocery

Heavy haul, government, aerospace, Bennett Motor Express US/Canada only l l l l 99.8% 650 176 N PRIV l l l l l www.bennettig.com 800-866-5500 housing, recreational vehicles

Bison Transport North America l l l l l Food, paper, retail, dry goods 98.0% 1,050 6 N PRIV l l l l l l www.bisontransport.com 800-GOBISON

Building materials, steel, roofing, lumber, Boyd Bros Transportation US/Mexico only l l 99.4% 950 8 N PRIV l l l l l l www.boydbros.com 800-633-1502 metal, pipe

Dry bulk, liquid bulk, food, chemicals, Bulkmatic Transport North America l l l 94.0% 550 45 N PRIV l l l l l www.bulkmatic.com 219-972-7707 rail-to-truck transfer

C.R. England US/Mexico only l l Food 100.0% 3,640 6 N PRIV l l l l l l l l l www.crengland.com 800-453-8826

Construction and building materials, Cardinal Logistics US only l l l l l 99.0% 1,686 137 N PRIV l l l l l l l l l l l l www.cardlog.com 678-612-2447 automotive, retail

Cargo Transporters US only l FAK/dry van 96.0% 450 1 N PRIV l l l l www.cgor.com 828-459-3206

Carlile Transportation US/Canada only l l l l l l l l l l l All DNR 350 10 N PRIV l l l l l l l l l l l l www.carlile.biz 253-874-2633

Celadon Group North America l l l Transportation to/from Mexico 98.0% 2,900 15 N PUB l l l l l l l www.celadongroup.com 800-CELADON

Central States Trucking US only l l l l l l FAK 97.0 % 200 2 N PRIV l l l l l l www.cstruck.com 630-595-9876

Consumer goods, automotive and parts, Challenger Motor Freight North America l l l l l l l 98.5% 1,500 6 N PRIV l l l l l l l l l www.challenger.com 800-265-6358 food and beverage, hazmat

Retail, high-value electronics, Concord Transportation North America l l l l l l 98.2% 200 24 N PRIV l l l l l l l l l l l www.concordtransportation.com 800-387-4292 entertainment, pharmaceutical

© 2008 Inbound Logistics 1 Inbound Logistics • September 2008 U Union TECHNOLOGY SERVICES N Non-union DRIVER VISIBILITY ONLINE / WEB PRIMARY TYPES OF SERVICE COMMUNICATION SUPPORT & CAPTURE SERVICES Fleet Size Tractors only, does not include trailers DNR Did Not Report

CELLULAR SATELLITE