Harvison Discusses Rising Costs Affecting Carriers, Shippers
May 1, 2001 12:00 PM
CLIFF Harvison, president of the National Tank Truck Carriers, told members of the American Plastics Council that carriers' costs are rising, and their rates for service can be expected to follow the same trend.
Harvison participated at the organization's logistics meeting in early March in Jacksonville, Florida. Approximately 90 shippers, carriers, railroad representatives, and suppliers were present.
“The cost increases are mandated by external forces — the end of the rail service crisis, government regulation, and the costs of services tank truck carriers must buy,” Harvison said.
“Three years ago, shippers begged the tank truck industry to tool up, hire, and train drivers to make up for the service failures caused by the Union Pacific/Southern Pacific transportation crisis. Eighteen months ago, shippers applied the same blowout patch when Conrail/Norfolk Southern went in the tank. Now that these crises are over, the rail traffic is moving again, but shippers expect carriers to absorb the continuing overhead costs caused by shipper emergency service needs. “You couldn't run your companies that way, and we can't either.”
Discussing government regulations and their impact on costs, he cited a driver hours-of-service proposal and a vapor control regulation.
“The Department of Transportation (DOT) has proposed major changes in the driver regulations,” he said. “At this point, we know only two things — some or all of those regulatory changes will be adopted, and when that happens every truck driver in the country (including those who serve your facilities) will lose productivity.
“Neither NTTC nor DOT knows whether that loss will be 5%, 10%, or 20%, but you can bet the ranch that there will be a loss in driver productivity, and you will have to pay for it.
“Moreover, this spring the Environmental Protection Agency (EPA) will propose rules that will mandate vapor recovery for the transportation of almost all volatile organics by rail, truck, or barge, nationwide. The plastics industry uses a lot of volatile organic chemicals in its business. The EPA requirements mean that virtually all cargo tanks, as well as railcars and loading and unloading racks, may have to be retrofitted to accommodate vapor recovery. The same goes for your customers' facilities.
Addressing the cost to carriers for goods and services, Harvison said that the plastics industry and the tank truck industry share at least one common denominator — they can't operate without petroleum products.
At the same time, he said, shippers are complaining about petrochemical price increases while carriers face rising diesel prices. Added to those costs are rising insurance rates.
“We see a number of the major underwriters, in both the primary and excess markets, opting out of trucking and going to more favorable risks,” Harvison said. “Obviously, this cuts supply. Insurers tell me today that they need to generate about $5,000 per unit for public liability, property damage, and environmental restoration coverage. Premiums are averaging about $2,800 per unit. The same thing is happening in worker compensation and corporate health and welfare programs.
“You do the math, but remember when you hear the phrase insurance surcharge, you heard it here, first.”
Despite the problems in the industry, Harvison pointed out that there are some things shippers can do to ease the situation.
“First, please remember that the drivers who serve shipper accounts are skilled professionals who are generally trained in the specifics of plant operations and equipment,” he said. “They are entitled to hospitable accommodations and a safe work place.
“Next, let's get realistic about pick-up and delivery windows. You drive the interstates, and you all know about congestion, construction delays, detours, and accidents. Work with your carriers to determine if economies are available from more reasonable scheduling.
“Next, stainless steel hoses are expensive and difficult to handle and manage. Evaluate whether supplying your own hoses might produce savings. And last, please pay your bills on time. Whether shippers are using third-party freight payment agencies or their own accounts payable software, playing the float ultimately adds to your cost of doing business.”
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