Posts Tagged “American Trucking Associations”

Part II – Allen Lund Co.: Freight Rates Not Keeping Up with Costs

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DSCN4660Kenny Lund doesn’t argue with the American Trucking Associations annual study, American Trucking Trends, which shows independent truckers and leased owner operators making $56,167 on average in 2014, which was 7 percent more income than the previous year.  However, the vice president of operations for the Allen Lund Company, a third party logistics provider, says freight rates still aren’t increasing enough and operating costs are high.

For example, gasoline in California is $4 per gallon, while Number 2 diesel is about $3.50 per gallon.  Take on excessive government regulations, plus an economy that leaves a lot to be desired, and Lund doesn’t see the freight rates keeping up with other costs.

“Truckers are making more money, but the rates aren’t up as much as expected, and the economy was expected to be much stronger,” Lund says.

He points out produce trucking is still dominated by companies with five trucks or less.

God bless the owner operators out there.  They don’t realize collectively what they do for this country and how important they are,” Lund surmises.  “We try to convey that as a company and treat these owner operators with the respect they deserve.  They are a critical component in the economic system of the U.S.”

He recently heard someone point out if all access to Los Angeles was cut off, there is only a four-day supply of food available.  Lund calls that thought “sobering” and notes people just do not realize what a great transportation system has been built in this country due to all of the small companies working together.

“With the efficient distribution system throughout the U.S., you can pretty much get strawberries anywhere in the U.S. the year around, and this is true with most major commodities,” he says.

ALC Logistics

As for Allen Lund Company, he is particularly excited about a division of the firm, ALC Logistics.  He developed the company’s Transportation Management System, building it from the ground up.  It is the first one created and provides software solutions ranging from claims management to freight audits, and carrier contracts, among other features.

“It is pretty exciting.  We are running about $1.4 billion through the system, working with the companies we have now, and we are just getting started,” Lund says.

As for the trucking industry itself, Lund is very interested in the development of driverless trucks.  For example the technology is now available where you can follow someone on I-40 from New Mexico to Arkansas and never touch the steering wheel.  He sees this addressing problems associated with hours of service regulations.

“I think we’re only five years or less away from it (driverless trucks),” he notes.

“If you can sell this to the driver by saying you are almost out of hours, then you put it on auto pilot.  The driver can then go to sleep while the truck is moving down the road, and have your hours still available when you arrive at destination,” Lund observes.  “It makes the single drivers like teams.”

(This is part II of a two-part series.  The Allen Lund Company was formed in 1976 by its namesake.  I have known Mr. Allen Lund nearly since the founding of the company.  His son Kenny Lund joined the company 26 years ago this month.  At that time the operation had 32 employees.  Today Allen Lund Company has 500 employees, arranges about 250,000 loads a year, of which about 40 percent is with fresh produce.  The company has 30 offices nationwide and will soon break the $500 million mark in annual sales. — Bill Martin)








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Independent Trucker Earnings Up; Trucks Hauling 70% of Freight

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ATA1The trucking industry brought in $700.4 billion in revenue in 2014, according to a report released this week by the American Trucking Associations. That’s the highest total revenue in history for the industry and the first time trucking has surpassed the $700 billion mark, ATA says.

The combination of a significant jump in freight volume in the year and tightening capacity spurred the revenue uptick, says ATA Chief Economist Bob Costello.

ATA’s report,its annual American Trucking Trends, also showed the trucking industry moved 68.8 percent of all domestic freight, or 9.96 billion tons, in 2014.

And the $700.4 billion in revenue accounted for 80.3 percent of all freight transporation spending, ATA says.

Owner Operators/Independents

Owner-operators, led by independents and flatbedders, had a record year for net income, according to averages from ATBS, the nation’s largest owner-operator financial services provider. Leased operators and independents together cleared an average $56,167 during 2014. That’s 7 percent above the 2013 average, $52,406. Strong freight demand, a driver shortage and plunging diesel prices contributed to the increase.

The 2014 total “is $2,000 higher than we predicted and most of it comes from the fourth quarter fuel cost reduction,” says Todd Amen, ATBS president and CEO. “All segments had a really good year.” Net income for independents and flatbedders topped $60,000. Independents’ income showed the biggest gain over the year, 8.7 percent. Flatbed haulers, however, experienced virtually no change in income in 2014. That reflects flatbedders experiencing stronger demand and rates a few years before dry van and reefers haulers, says Gordon Klemp, head of the National Transportation Institute. NTI’s National Survey of Driver Wages tracks compensation of drivers at medium-size and large fleets. “Most of the independent contractors operating in the independent and flat markets are on percent of load type programs, so their pay adjusts quicker,” Amen says. “The independents are certainly more in the spot market as well.  So these two segments reflect a really good freight market last year. They have higher highs in good times and lower lows in bad times, more volatile than the other segments.”

2014, net income for the groups tracked by ATBS was:

  • Independents: $60,157
  • Dry van: $54,490
  • Flatbed: $60,510
  • Reefer: $52,064

Klemp says falling fuel prices helped owner-operator earnings in two ways. One is owner-operators receiving less than a 100 percent fuel surcharge pass-through have seen their share of fuel costs dropping proportionately. The other is that because surcharges are adjusted weekly after the U.S. Department of Energy releases its average fuel prices, a surcharge will overcompensate an owner-operator as long as prices continue to fall during the week.

Sign-on bonuses have been stable in recent months, Klemp says. The mid-point is $3,000 to $6,000, with the top tier $6,500 or more. Team bonuses remain very strong, and he has seen them as high as $15,000. Many fleets use bonuses selectively by region, to meet demand, and often keep high bonuses in place only briefly.

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Big Rig Owner Slashes Fuel Costs, Increases MPG

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BullyDog1More than three million heavy-duty Class 8 trucks move 9.2 billion tons of freight annually along America’s arterial highways, according to the American Trucking Associations. It takes over 37 billion gallons of diesel fuel to move this freight, costing over $121 billion. Fuel costs are the largest variable cost in trucking. How can you control this? Invest in simple technology to boost mpg.

One man is doing exactly that.  Meet Daniel and his wife, Phyllis Snow, of Snow Trucking who are adopting the latest technology to slash fuel costs and become more competitive in the dry freight business.

By employing a methodical, almost scientific, approach to evaluating new technologies, the husband and wife team have transformed their 1996 freightliner classic XL with over 1.8 million highway miles from a 4.8 mpg vehicle to 7.5.

Two years later, the couple has documented savings of $30,000 in diesel fuel costs for the truck they affectionately refer to as “the Goose.” If every operator was as progressive as the Snow’s, the industry would save billions in fuel, not to mention the positive impact on the environment.

Targeting Fuel Costs

In 2012, the husband-and-wife team made the move from hauling livestock on a regional basis to dry freight runs throughout the Central and Southern United States. Facing stiff competition, they quickly realized that they needed to re-think their fixed and variable costs.

“The very first thing to know in any business, including trucking, is your operating costs,” emphasizes Daniel Snow. “Once you determine that, you discover that fuel is eating you up when it’s over 32%.”

At the time, fuel costs for the Goose was a whopping 48% of their total expenses. So the couple decided to marry their old school professionalism and service with a commitment to apply new technologies that could drive down fuel costs.

Team Snow was determined to look beyond OEM claims of fuel savings and instead consider all available aftermarket products. Snow arrived at this conclusion by meticulously examining his own fuel consumption data, quickly discovering that “a lot of time, the data [from manufacturers] appeared skewed.”

“Our major goal over these last two years was to find real raw data, highway data, that is not manipulated in any way.”

To accomplish this, Snow engaged in a step-by-step approach to document fuel consumption and any associated savings. They identified and installed various fuel saving devices and then kept detailed notes and calculations. No two devices were applied at the same time.

“Just about everything we do, we do in phases. That way we know exactly what each individual product is doing for us,” says Snow.

Gauge Tuners to Improve Engine Performance

At the top of Snow’s list was investigating high-performance gauge tuners that help reduce fuel consumption and improve engine performance.

While not all gauge tuners are equal, these devices typically focus on tuning the engine control module (ECM) to improve performance and then some provide additional features such as a driving coach or diagnostic reader.

Besides the obvious discriminator of wanting the tuner that optimized fuel savings the most, Snow insisted on being able to upload the tune himself and not mail away his ECM, which would result in significant big rig down time and lost revenue. “We wanted to buy the tuner, not just a tune,” says Snow.

All of a sudden, the list of options became very thin. In fact it melted away to one – the Heavy Duty Gauge Tuner (HDGT), a Bully Dog product from Derive Systems.

Snow installed the device on the Goose’s 60-series Detroit Diesel in January of 2013.

Describing himself as “mechanically inclined, but not computer inclined” he was able to plug it in, follow the prompts on the screen, and complete a short download in less than 15 minutes.

“I was really impressed with how simple it was to plug-and-play,” says Snow.

The unit was installed, while he and his wife were on the road, at a shipper’s facility in Atlanta, Georgia. This was significant, because the couple had recently completed three identical runs from Atlanta to the final destination in Texas.

“We had completed that run several times, so we knew exactly what that load cost us,” explains Snow.

The initial test run of the engine programmer yielded an immediate saving of $174.

Snow then began calculating the fuel savings every 1,000 gallons of fuel; after calculating the results, the Goose had gained 1.4 mpg on average.

The next step was to take advantage of the HDGT’s unit’s “driving coach,” which offers tips that help develop positive driving habits to improve fuel economy.

“We started adjusting our driving habits using the monitor and gained another 0.7 miles per gallon, just by plain old driving better,” says Snow.

Over the past two years, Snow has traveled 236,000 additional miles with the engine tuning software and saved over $30,000.

“Other truckers will find that in a very short period of time the investment in the heavy duty gauge tuner will go from a ‘cost’ category and move across the page to the ‘income’ side,” says Snow. “For us it was after 4.5 months when the technology converted to a profit center.”

To squeeze out even more fuel savings, the couple also installed a SmartTruck Undertray system on their trailer to smooth the rig’s aerodynamic profile. This change netted an additional 0.4 mpg.

Finally, they installed another Bully Dog product from Derive Systems, a ceramic-coated exhaust manifold that added 0.2 mpg.

The grand total was an additional 2.7 mpg, boosting The Goose from 4.8 to 7.5 mpg.

More importantly, Snow says, “it took us from being non-competitive on what we were bidding on to being more efficient than most company-style trucks out on the road.”

Declining Diesel Prices Triggers Need for Efficiency

It may seem counterintuitive, but the recent decreases in diesel fuel prices actually makes increasing fuel efficiency even more critical.

Savings from the decrease in fuel prices are often offset by plummeting freight rates. Even if both were to drop proportionally, this doesn’t take into account the fixed costs of trucking – insurance, tags, and trailer payments – that don’t change.

So what does Snow intend to do with the money he saves? In addition to paying his personal bills and setting a little aside for retirement in the not-too-distant future, the couple would like to contribute more to charities, indulge in good food and add more chrome to the Goose.

“The more money we don’t have to put in the fuel tank, the better; and the more money we have for ourselves and others,” concludes Snow.

By Marissa Muller, Derive Systems.

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Some Solutions to the Worsening Driver Shortage

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Robert Lawton+1According to the American Trucking Associations (ATA) our industry currently needs another 30,000 qualified drivers.  The number is expected to rise to 200,000, over the next 10 years.  Drivers are getting old.  The average age for -hire is about 49; about 55 for less-than-truckload drivers (LTL) and private carriers.  Average turnover rate is 115-120%.

Hauling more than 70% of all freight in the US, trucking is a vital component to economic growth of the country.  But there is not enough capacity to handle the anticipated growth.  The result is that everything slows down.

Being away from home for long stretches is a major drawback to attracting recruits to drive trucks.  The age requirement, restrictive regulations and demanding work schedules are further deterrents.

Des Moines Truck Brokers (DMTB) President Jimmy DeMatteis pointed out that “The driver pool is being pinched from both ends.  Baby boomer drivers are retiring.  But we have also lost young people who elected to go into the work force right out of high school.  They used to be allowed to drive interstate at the age of 18.  Now that age has been raised to 21.

“By the time they are in the labor market for three years, young adults can be well on their way to a career in construction, retail or service.  They are not interested in starting all over again from the bottom as a brand new truck driver.  Raising the age limit has been a major blow to driver recruitment.”

There is a move afoot to convince insurance companies to create training standards that would allow young drivers behind the wheel.  DeMatteis notes, “At the age of 18, they are allowed to go into combat and fly a plane and drive a car.  With the proper training, they should also be able to drive a truck.”

Driver pay must be increased if the capacity shortage is to be addressed.  In real dollars, drivers today earn less than they made in 1990.

Solving the driver shortage will undoubtedly cause an increase in the cost of shipping.  It will also take innovation and a dose of reality as shippers and carriers face the problem head-on, in 2015.

Reprinted with permission from  the 2015 February issue of Dashboard, which is published by Des Moines Truck Brokers.

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High Driver Turnover Continues

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Driver turnover rates among the nation’s fleets has gone up and continues to be high.  It has increased with small trucking companies too, but remains well below the big carriers.

The American Trucking Associations reports turnover rate for large fleets to be at 89% for the third quarter of 2011.  That is up 10% from the second quarter rate of 79%.  The driver turnover rate has risen 50 percentage points since the start of 2010.

Meanwhile, small truck load fleets had a 57% driver turnover rate, up 10 points since the third quarter of 2008.

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