Trucking Operating Costs Report Highest Jump Since 2008

September 27, 2012 - As we continue to hear of looming equipment and driver shortages in the coming months, a recently released report by the non-profit American Transportation Research Institute shows that truck operating costs rose 9.3% to more than $1.70 per mile in 2011.  Reasons cited for the increased costs were fuel and oil, driver wages and new engine [EPA] costs.

Tightening capacity and increasing operating costs are catalysts for upward pressure on rates across the board for truckload, LTL and specialized carriers.  Experienced third-parties have navigated these difficult roads many times in the past couple of decades and proven to be force equalizers to help their clients control the rate of cost increases and ensuring available capacity. Smart shippers are fortifying relationships with 3PL’s in the event of further strained capacity. 

The third party logistics industry continues to grow at more than 4 percentage points than the gross domestic product and Kingsgate Transportation has been helping our clients manage these turbulent times since 1986.

To download a copy of the ATRI report, sign-up for the report at www.atri-online.org

Cass Freight Index Report August 2012

August 2012. North American freight volumes and expenditures both declined 1.1 percent in August from July levels.

August Shipment Volumes
North American freight volumes continued to drop off, and at a faster pace than last month’s 7 percent decline. On a year over year basis, shipment volumes were down 1.1 percent from last August. This is the third time this year freight shipments have fallen below the level for the same month in 2011. Freight volumes grew 9.9 percent during the first half of the year, but after two months of consecutive contraction, the annual growth has fallen to 8.0 percent.

Weak conditions in both the U.S. and global economies have led to the continued decline in freight shipments. Inventories are building beyond the levels needed to support expected sales and many retailers and manufacturers have pulled back on restocking.

The Consumer Reports Index measuring consumer financial health showed that back to school sales have not met retailers’ expectations. Their Index fell from 9.9 to 9.4 in August and is well below last year’s 12.0 percent. In addition, retailers are reporting more and deeper discounting in an effort to move goods off the shelves. All of this points to a continued drop in freight volume for the remainder of the year.

August Freight Expenditures
Freight expenditures fell for the fourth month in a row, dropping 1.1 percent in August. Compared to August 2011, freight spending is up 3.8 percent; however, the cumulative rise in 2012 is 4.4 percent (against volume increases of 8.0 percent). For the most part, rates were largely unchanged in August. Truck capacity is getting very tight in some regions of the country due to both a lack of equipment and an even more severe driver shortage. Driver pay has been increasing faster than rates, indicating that the increased cost has not yet been passed through. Expect rates to hold firm at current levels or even increase as capacity continues to tighten and carriers face higher costs for labor and fuel.

Strategies for Best Practice LTL Partnership

With a modest recovery in the LTL sector in place and constraint on the part of the carriers to hold capacity, what strategy do you have in place to control possible rate increases and protect your service needs moving forward?

In this article, Logistics Magazine has three industry experts sit down in a "best practices" round table discussion on strategies to deal with the changes that could lie ahead for all of us.

From our perspective, we would like to highlight the conversations around engaging a 3PL to manage these negotiations and to leverage multiple volumes, from multiple clients to contain cost increases while maintaining a solid LTL network to meet our customers growing needs. Our customers who have taken advantage of our online shipping portal, or our EDI services, have made themselves very attractive to LTL partners because we make it very easy to transact business on a daily basis. Please visit our website for more information on our LTL services: www.kingsgatetrans.com

ATA Brings Action Against HoS Rule and FMCSA

"We regret that the FMCSA and the Obama Administration have put the ATA and its member companies in a position to take this legal action" said ATA President and CEO in announcing that the ATA has filed a petition in the D.C. U.S. Court of Appeals.  In the suit, the ATA is asking the court to review the recently published 'final' rule that has changes hours-of-service for commercial drivers. 

The basis of this action is that the ATA feels the FMCSA did not follow the proper rules and procedures for rule-making in reaching this decision to bring the change in the regulations. For more, click here

2012 Game Changers

John G. Larkin, CFA, Managing Director with  Stifel Nicolaus Equity Research, Transportation & Logistics provides his insights on 2012 logistics outlook. The summary is below and the full article may be found here.

1. The November 2012 elections in the U.S. will set the tone (one way or the other). Will Americans opt for more regulation, higher taxes, energy inflation, demonization of capitalism and the so-called "rich"? Or will the political pendulum swing back toward the right once again?

2. The U.S. takes a giant step towards energy self-sufficiency.

3. Congress finally passes a Surface Transportation Infrastructure Bill.

4. Mexico cements its position as "the new China."

5. Federal Motor Carrier Safety Administration (FMCSA) Regulations (new and proposed) and deteriorating driver demographics set the stage for "the mother of all capacity shortages.”

6. Dedicated fleets finally become the rage.

7. Truck brokerage approaches saturation.

8. Eastern rail-based intermodal infrastructure reaches critical mass: the stage is set for additional market share to shift to all-water service.

9. U.S. export growth taxes port capacity.

10. Resurgence of the U.S. industrial base accelerates.

Conclusion: While it is always challenging to look into a crystal ball and predict the major trends that will shape any industry, we are struck by the number of generally favorable trends that are evolving in the broader transportation and logistics space—almost all of which will have the net effect of reducing effective capacity or increasing demand for freight transportation and logistics services.

Transportation Reauthorization Bill House vs. Senate

This week the U.S. House of Representatives and the U.S. Senate are scheduled to debate their respective versions of the Transportation Reauthorization Bills. The following information is a basic summary of each piece of legislation.

• House Bill – H.R. 7, the “American Energy & Infrastructure Jobs Act of 2012.”
• Five-year Bill at $260 billion
• Funding Sources
• Extend the motor fuel taxes, and all three non-fuel excise taxes at their current rates through September 30, 2018.
• Net increases in Federal revenues from certain onshore and offshore domestic energy leasing and production; be appropriated to the Highway Trust Fund.
• Ends the transfer of all motor fuel tax amounts to the Mass Transit Account, instead funds the account with a one-time appropriation of $40 billion.
• Partisan Legislation

• Senate Bill – S. 1813, the “Moving Ahead for Progress in the 21^st Century Act” (MAP-21).
• Two-year Bill at $109 billion
• Funding Sources
• Extends the motor fuel taxes and three non-fuel excise taxes at their current rates through September 30, 2015.
• Transfer $3 billion from the Leaking Underground Tank Trust Fund (LUST Fund) to the Highway Trust Fund.
• Prohibits taxpayers from claiming the cellulosic bio-fuels credit for unprocessed or excluded fuels as defined in section 40(b)(6)(e)(iii) (such as black liquor).
• Transfer the gas guzzler taxes received in the Treasury to the Highway Trust Fund.
• Establish a provision that bars the Secretary of State from issuing a passport to any individual who has a seriously delinquent tax debt. (Excess of $50,000).
• Establish a provision that allows the Department of Treasury to levy up to 100 percent of a payment to a Medicare provider to collect unpaid taxes.
• Appropriate from the General Fund and deposit in the Highway Trust Fund amounts equivalent to amounts received in the General Fund for fiscal year 2012 through fiscal year 2014. Customs Duties collected on imported vehicles are an example of funds deposited into the General Fund.
• President Obama supports
• Bi-partisan Legislation

Highway Bill Nears Vote

Both houses of Congress were scheduled to vote this week on separate transportation reauthorization bills that would provide highway spending of more than $41 billion annually.

The Senate’s $109 billion bill is a two-year bipartisan proposal that last week survived a test vote of 85-11 on a measure that limits debate to 30 hours and prevents a filibuster of the bill.

After the Feb. 9 vote, Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, begged colleagues not to attach “controversial or extraneous” amendments that would “slow this bill down.”

The nation’s transportation system is currently being funded by the eighth temporary extension since the previous reauthorization bill expired in 2009.

The Senate bill contains no new taxes and does not address truck weights or lengths, although it would mandate electronic onboard recorders for trucks.