ATRI official describes
in trouble in interview
Aug 25, 2010 10:47 AM
Dan Murray shares his view of the future of CSA 2010 as well as other challenges and solutions in the US transportation industry. He is the vice-president of research at American Transportation Research Institute, part of the American Trucking Associations Federation, a 501(c)(3) not-for-profit research organization headquartered in Arlington VA. This past April, he received the William K Smith Distinguished Service Award from the University of Minnesota Center for Transportation Studies. This recognition is extended annually to a professional in the field of freight transportation and logistics who demonstrates leadership and contributes to the education of future freight transportation leaders.
Q: What is biggest issue you are seeing in the transportation industry?
A: Unfortunately, the transportation system is in trouble—for both trucking and autos, and no one seems able to fix it.
The entire transportation infrastructure is declining in two critical areas: capacity and quality. The special agendas and political debates over solutions has paralyzed governments’ abilities to agree on a fix.
The “decline in capacity” is really just our inability to keep up with demand. We’re not seeing a reduction in capacity. That remains static, but the demand is increasing 3%-5% per year and we’re doing nothing to solve this. Most proposed solutions are focused on using tolls and congestion pricing fees to move cars and trucks from one congested roadway to another.
The bottom line is that the distribution system for the largest economy in the world is in trouble and there’s no indication that we are willing and able to develop a consensus on the solution set and revenue source for fixing it. The next transportation bill (it’s a six-year bill) is a year overdue. Some of the revenue-generating ideas swirling around include satellite tracking and tolling of cars and trucks, privatizing parts of our infrastructure, tolling vehicles off the road when certain congestion levels are reached. With those strategies, local jurisdictions would likely wind up paying the price. And the safety impacts are clear: more crashes, injuries, fatalities.
These shortsighted solutions ultimately push back the new highway capacity and roadway improvements by years or even decades.
With the economy now improving, truck trips increasing, and traffic congestion growing, we need to act quickly. The good news is the magic bullet is a simple, meaningful increase in the state and federal gas tax. It is a highly efficient and equitable (eg, Hummers pay more than Hondas) source of funding. It is also generally beyond the reach of special interests and diversions to other programs. Users, including the trucking industry and the AAA, are demanding more and better transportation infrastructure and are willing to pay for it with a tax increase, but the politicians are saying no. Clearly there’s a misunderstanding…or maybe the voters just aren’t in charge anymore.
In the long-term, the nation can expect higher inflation, lower productivity, and a continued decline in its ability to compete in the global economy. As a result, more manufacturing jobs will move overseas.
Q: Before the recession, the driver shortage was an ongoing issue in ATRI’s annual “Critical Issues in the Trucking Industry” report. Do you see this as a big issue in the coming year?
A: Absolutely. We knew before the Great Recession, which started around 2007, that the driver shortage issue was really big—not only because a strong economy made it hard to find good drivers, but also because the baby-boomer truck drivers were retiring in droves. In 2010, it’s again getting hard to find good, safe truck drivers. Many of those we do have are starting the retirement process. It was bad then, but now some of the new regulatory and compliance programs coming down will make it even harder to identify and recruit good truck drivers. When you mix in the retiring drivers, the economy-based shortage, and more stringent safety and regulatory requirements, you have a perfect storm of having to find truck drivers.
One promising population for new drivers is women. Some of the challenges for women entering our industry as truck drivers have included safety concerns and ergonomic issues like safety belts and steering. The advancement of automatic transmissions and power steering has made it easier for women. We’re also looking at improving safety and security through improved lighting at truck stop facilities. Other populations that may help are post-military and Hispanic, but all groups have unique challenges. Younger drivers often do not want to wait until they’re 21 to get a CDL. Much more research is needed on the different needs and lifestyle issues of different populations.
Driver competition, of course, is another factor. It’s clear that in 2010 driver wages are going up considerably in order to either draw drivers from competitors or bring new drivers into the marketplace.
The bottom line is that two years from now, when CSA is in place and we are hopefully in a hot economy, the driver shortage will be worse than we’ve ever seen it in trucking industry history.
Q: How is the congestion problem affecting the trucking industry’s ability to recover from the recession?
A: Congestion is a very complex issue but it’s not as big a problem right now as it was three years ago. In this last recession, which took vehicles off the road, we actually saw decreases in congestion and average truck speeds went up. In addition, gas prices were extremely high in 2008, which drove people to public transit, carpooling, and telecommuting or they were outright unemployed and not driving. Right now, trucking is rebounding very nicely—but with a 9.5% unemployment rate, there are still not a lot of folks back on the road. That said, there are certain major metropolitan areas like Los Angeles, New York, Atlanta, and Chicago that will always have congestion.
When the employment rate starts to improve, it is just going to get worse and worse. Maybe a year from now congestion will be a big issue again. I suspect it will climb again soon and unfortunately, what’s almost as bad as congestion itself are the proposed solutions to address it.
For example, there are pricing initiatives out there that charge higher fees during rush hour to force people out of it. Nobody is talking about exempting trucks from this solution. Some toll advocates are unaware of the obvious: that a truck driver would only be in congestion if he has to be. The shipper is king and dictates nearly everything. Truck drivers are told when loads must be dropped off; for instance, before morning/lunch hour rushes at a fast food restaurant. Trucks have to be there when workers are there at the loading dock to unload. Trucking companies can’t move entire labor shifts to midnight.
Also, drivers may be forced onto alternate routes such as local roads that weren’t designed to handle commercial traffic, and in turn local governments will pay the price. This also poses higher safety risks for drivers on the roads. This is as bad or as worse as congestion itself. It can get very costly and inflationary. I’m more concerned what the solutions look like in terms with dealing with the congestion.
Q: What do trucking companies need to do to prepare themselves for the congestion issue?
A: Believe it or not, they can advocate hard for fuel tax increases. Why is it good for them? First, we don’t have enough money to build more capacity. If we get enough money we can add more lanes, or more alternative routes. Second, fuel taxes are very efficient. The government spends two cents on every dollar spent collecting fuel tax. Tolls spend 20-30 cents of every dollar collected. Third, it would wipe out the need for these other congestion pricing tools out there. The caveat is that we need to make sure the money raised is dedicated to infrastructure (concrete and asphalt).
Q: What do you see on the horizon beyond CSA 2010?
A: I still see more CSA 2010 impacts, not fewer. I do see modifications to it, and I see it being applied in new and different ways. Shippers and brokers will be brought to the table—some voluntarily, some dragged. Safety is a supply chain issue. The majority of car/truck crashes are caused by the car driver. 50%-75% of the time, the police determined the car driver was primarily responsible. The number of times the truck or the truck driver were solely responsible is relatively small.
Shippers, brokers, car drivers: I see the future bringing all these entities to the table. The government will develop incentives to participate and disincentives to those who don’t. I think many people are still analyzing the impact of the $20 million C H Robinson jury award. How far out does financial and legal liability go in the supply chain? C H Robinson was two steps removed from the bad truck driver involved in the fatality. Companies will need to ensure they’re a proactive part of the safety equation in order to minimize negligence and liability.
I see CSA 2010, plus all the legal and financial issues that are associated with safety and operations, making the stakeholder table bigger and the number of chefs in kitchen larger. I think that’s mostly good. There needs to be broader understanding, agreement and partnership.
We (at ATRI) have a research project underway that is studying the role of the supply chain in the safety equation. Shipper contract clauses could change to improve collaboration so everyone benefits from safety improvements and minimize liabilities. To get there, things are going to get stickier for some folks. Drivers and carriers—and now shippers and brokers—are now going to face new challenges in terms of safety and financial solvency far more than they have ever been. Figuratively speaking, it’s going to separate the men from the boys.
One of the biggest challenges for the trucking industry is the extreme competition, good or bad, among all carriers—big and small. The classic lines between the clear sectors of LTL, TL, and courier services are getting blurry. There’s intense competition among everybody now. Something is going to give, and I think some percentage of the industry’s carriers and drivers are going to consolidate or disappear. When that happens, assuming it works right, we’re going to be left with a very safe, very profitable group of carriers and drivers.
What’s good for trucking may not always be good for shippers. Maybe we’ll get the pricing we need to improve profit margins. Extra revenue can also be expended in safety and driver compensation. Ultimately, the stars are lining up so that over the next three to five years there will be fewer drivers and carriers, and the survivors will be much better off.
That’s the most challenging task out there for trucking companies: to figure out what internal and external forces are going to whack us and then how prepare ourselves. They must have the ability, resources, and foresight to look out to some window of time beyond tomorrow and position themselves for the next one, three, and five years out.
There are some trucking companies legitimately struggling to get out past tomorrow or next month and don’t have the ability to look forward. They can’t read tea leaves and account for them, and those are the people who will have the greatest challenges. They need to figure out quickly how CSA is going to affect their business model. There’s a suite of technologies that can help with safety and productivity. The industry needs to know where to find the next-generation drivers, how much to pay to keep safe and productive drivers, and how to balance regulations with productivity. They’ve got to answer the tough questions for the future, and they can’t just live for the moment. That model won’t survive. The survivors are going to be the proactive and innovative managers, executives, and drivers.
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