Conley Briefs Chemical Shippers

April 1, 2001
Editor's Note: John Conley, vice-president of National Tank Truck Carriers (NTTC), discussed issues impacting the industry at the ChemWeek Transportation

Editor's Note: John Conley, vice-president of National Tank Truck Carriers (NTTC), discussed issues impacting the industry at the ChemWeek Transportation and Distribution Conference 2001 held January 22-23 in Houston, Texas. Following are excerpts from his comments.

I WOULD like to talk about the positives of our industries, and there are many. I will ask for the support of the chemical shipper community — our customers — to help tank truck carriers to continue to provide the service shippers expect and that carriers want to provide.

We are an industry with at best a 3% profit margin that serves an industry that looks at a projected 6% profit margin in 2001 as a downturn. There is no mystery here. We need rate increases and not just to improve the bottom line.

The number one issue facing the tank truck industry is the attraction and retention of quality truck drivers. We were already in a very difficult situation when the hours-of-service proposal was introduced last year. We conservatively estimated that the productivity of the average tank truck driver would have been reduced 20% by the proposal.

The rulemaking was shelved for at least a year, largely through the efforts of the American Trucking Associations (ATA). It will come back in some revised form, probably later this year. The trucking industry wants some realistic changes to the hours-of-service regulations and will work with the professionals at the Department of Transportation (DOT) to develop them.

Carrier Survey

National Tank Truck Carriers conducted a survey in December 2000 of its members who specialize in chemical transportation. Here are some of the things we found in their responses about the driver situation:

  • Average salary of the chemical tank truck driver is $41,000 a year, while the range is from $35,000 to $50,000. Considering the time spent on the road, the driver is making about $13 an hour.

  • Average driver is 45 years old. We have seen this average age increase over recent years. Unless we can make driving a more attractive and better-compensated profession, we will see a further graying of our driver force.

  • Average driver turnover rate is reported at 50%, with a range from 30% to 80%. Within the trucking industry where some segments see an annual turnover of 100% or more, 50% is considered good.

  • Safety managers say it takes about $5,000 to recruit and properly train a chemical fleet driver. Most turnover occurs within the first year a driver is with a company. In many cases, turnover is the result of the carrier terminating the driver.

Driver Pluses

What do drivers like about the industry? Here are a few things:

  • Prestige. Shippers can help reinforce this positive image, and many of you do.

  • Clean work.

  • Career possibilities. Once a driver has achieved some seniority and developed his niche, better earnings are possible.

  • Regional work means less time away from home.

  • Safety-conscious companies.

  • Indirect supervision.

  • Small and family-owned carriers.

  • Shippers and receivers appreciative of driver's work.

Let's look at some things that drivers do not like about the industry and contribute to the 50% turnover:

  • Better pay in some nontank areas.

  • Stress from handling hazardous materials.

  • Not the business they thought it would be.

  • Too many duties and responsibilities beyond driving.

  • Too much emphasis on safety and training.

  • Cyclical nature of the chemical business.

  • Wasted time waiting to load and unload.

Higher Pay

The average pay should be $50,000 a year. We have to improve the working conditions and allow our drivers to do what they most want to do — drive. We need to get them into and out of chemical plants much more quickly. We have to give them realistic schedules that don't tempt them to break the law or take chances.

There are two factors impacting tank truck carriers much more today than when this meeting was held in January 2000. Those factors are fuel prices and insurance costs. It is not an exaggeration to say that some carriers are on such thin margins that they may not be able to survive.

The new Congress will surely be asked to consider the Motor Carrier Fuel Cost Equity Act, which passed the House last year. The bill would require that a fuel surcharge automatically kick in when fuel price increases hit a certain point. NTTC is reviewing the legislation and has not yet developed a position.

On the subject of insurance, primary coverage for tank truck carriers increased 8% to 10% in 1999 and 15% to 22% in 2000. Carriers can look for even greater increases in 2001. Although insurance rates have risen, statistics for 1999 show that accident rates and deaths went down for the trucking industry.

One problem is that the plaintiff's bar has developed a much better understanding of the trucking industry. In 1990, one out of three bodily injury claims from an accident were represented by an attorney. Now, half of all claimants come equipped with counsel — 75% in California. This has led some companies to settle even when they know they are not at fault.

On another subject, it may be that we have done such a good job providing a service that shippers are able to look at it as a commodity. Unfortunately for us, the more our service is viewed as a commodity, the less shippers seem to be willing to pay for it. And the less they pay for it, the more it may become a commodity. There are some chemicals that are relatively common and do provide fewer transportation challenges. However, I understand that the tank truck industry is seeing more products that used to be classified as dedicated hazardous materials movements in dedicated trailers now being classified as system freight in shippers' ever-increasing efforts to reduce costs.

Third Parties

I am told that the increasing use of third-party logistics companies tends to reinforce this commodity approach. The less the new logistics providers know about the tank truck business, the less they will think our services are worth. If they understand the business, then they must understand why some of the bids they see are too low for a carrier to provide safe and legal transportation. They will understand they may get 50 bids for a specialized product, but that there are hardly 50 companies that can properly do the job.

There are some well-qualified logistics providers who understand the tank truck business. But there are too many that only know how to differentiate solely on price.

We understand the tremendous cost reduction mandates chemical distribution managers operate under today. However, we are concerned that some of the traditional relationships between the shipper and carrier are being diminished as more and more traffic is simply put out to bid. In the short run, making the incumbent carriers constantly bid against new suitors may reduce costs. We believe, though, that long-term relationships where carriers can help customers manage the distribution component of the supply chain will be better for shipper and carrier.

Another issue is heel reduction. Carriers and shippers, and some of your consignees, worked to reduce the amount of product left in a tank after delivery. Given the rising costs of cleaning trailers and disposing of wastewater, perhaps it is time to revitalize the campaign to reduce heel. Remember that a heel is basically product someone paid for but did not receive.

Plant Requirements

We know plants will eventually require us to make changes to our trucks. That has already happened at some plants. We will work with the American Chemistry Council and the Truck Trailer Manufacturers Association to try to develop an approach that will minimize the impact on our current and new trailers. The more we can standardize trailer configurations, vapor recovery fittings, couplings, and other transfer equipment, the better we can serve you.

There are things shippers can do that will help us increase the utilization of our drivers and equipment. We would appreciate it if shippers would survey their plants and customers to determine if they could be more flexible for pick-up and delivery schedules. Spreading the loads out would give us better productivity from our drivers and equipment, and would reduce plant congestion between 7 am and 9 am.

In some ways, our equipment and drivers should be looked at as time, and time is a perishable product. Providing us with more notice, creative use of pre-loading, and quicker inspection and sampling would benefit us all. Planning to allow top-loading would reduce cleaning and equipment downtime costs.

Help us increase our loaded miles by matching inbound and outbound traffic. It will require closer cooperation and communications between the shipper and carrier. This is less likely if the trend to bidding out more traffic, especially through third parties, continues.

Long-term contracts of three to five years would greatly help us stabilize our business and our drivers. Such relationships would allow more productive design of equipment, perhaps by allowing larger payloads where consignee transfer equipment could be used. Drivers could more easily be dedicated to a route or a customer.

It would be very helpful if shippers could share production projections for the next month or quarter volumes with us. This would help us in planning our equipment and driver requirements to best serve you.

Sometimes, we could use help with shipper customers. We want to work with knowledgeable consignees who can help ensure a safe delivery to the right storage tank. In some cases, we may have to upgrade delivery areas that were designed for equipment 30 years ago.

Many of our carriers would like to be more involved in helping shippers manage their distribution systems. We can put people in plants and help plan pick-ups and deliveries. We have carriers that have done this with corresponding benefits to shippers, consignees, and the carriers.

We need help in combating the threat that nitrogen atmospheres pose to our employees, especially those in repair shops and wash bays. We have approached the American Chemistry Council a number of times on this subject and have not been satisfied with the cooperation we have found. If we are not able to find a good operations solution to this problem, NTTC is prepared to initiate regulatory action.