Carriers, Shippers Shift Routes and Expand Transportation Options to Boost Efficiency

As carriers and shippers navigated the weak economy, they worked to increase efficiencies. For some this meant shifting distribution patterns, while for others it meant turning to intermodal and private fleets.

Decreases In The Length Of Haul
Over the past few years, the average length of haul for dry vans has fallen to 550 miles from roughly 900, said Bob Costello, chief economist for the American Trucking Associations.

“This is the result of many factors, including more distribution centers by big box retailers, resulting in shorter hauls into and out of those distribution centers and some shifting of long-haul freight to intermodal,” Costello said.

However, Costello said the trend towards the shorter length of haul has flattened out. “In other words, there are still some reductions, but not at the rate as in the past,” he explained.

Gary Petty, president of the National Private Truck Council, said he thinks long-haul runs will change when the expansion of the Panama Canal is complete in 2015. “You’re going to see more traffic routed away from Long Beach to Jackson and Charlottesville. That will take pressure off of long-haul runs going eastward from the west coast,” he explained.

Jonathan Starks, director of transportation analysis for FTR Associates, said that while there are fleets that are shifting their lengths of haul and getting shorter, more regional plays, the fleets making the shift tend to be large, public fleets. “They get more play and have more information available,” he said.

Starks said trucking is on the rise and FTR Associates breaks information down by length of haul. He said, “Short haul right now, which is anything less than 120 miles, is growing around 2 to 4 percent. Medium haul, which is 125 to 300 miles, is growing at about 6 percent. Long haul, which is anything going 300 to 550 is growing 6 percent. Then we have the super-long haul—anything over 550 miles—1,000 miles to 1,500 miles—and that is also growing around 6 percent per year.”

Although there is some movement into the regional market, Starks said it is more specialized and isn’t as overarching as some people make it out to be.

The Pending Driver Shortage
The driver shortage is expected to increase to 115,000 drivers by 2016 from 30,000 drivers today, said Rosalyn Wilson, author of the 24^th Annual State of Logistics Report.

Driver turnover is approaching 100 percent in the truckload space, which has high recruitment and retention costs associated with it, Costello said. To find and keep drivers, carriers are increasing pay, Costello said.

Some fleets may be going after more regional freight to help get drivers home more often, though it isn’t a major factor in the shift, Costello said. “Much of the reduction in dry van retail freight is due to the shippers, not the carriers. As big box retailers built more distribution centers, the average length of haul fell,” he explained.

The driver shortage is shifting some network designs for some shippers, said Brent Beabout, senior vice president of supply chain for Office Depot. He said Office Depot is mitigating risk by turning to more intermodal shipments.

“We’ve also been going to more dedicated fleets in major metropolitan markets,” Beabout said, adding that the company is also using more 3PLs and cross-docking.

Costello said any movement to intermodal as a result of a pending driver shortage is on a “very, very limited basis.”

One Fleet’s Reaction To The Driver Shortage
Steve Branch, director of recruiting and advertising for C.R. England, a refrigerated carrier based in Salt Lake City, said recruiting can be a challenge. To help attract drivers, the company has recently launched a new $7,500 SIGN-ON BONUS PROMOTION for new team drivers joining the company.

“We are always looking for new and innovative ways to boost our recruiting reach,” Branch said. “Many of our recent methods have included increasing our presence in printed publications in order to reach experienced drivers, veterans and others seeking a professional driving career.”

The company also has created a new department to assist drivers “with virtually anything they need,” Branch said. “It provides the driver with a better overall experience. It also provides them regular access to our company executives who themselves are actively involved in this department.”

Growth Of Intermodal
Intermodal freight is on the rise, but several industry experts said they expect that growth to level out.

“Intermodal is growing 4, 5 and 6 percent a year, but it can’t grow a whole lot more than that before it runs into capacity concerns,” Starks said, adding that intermodal has made improvements on the service levels and time of delivery. “It is a much more viable option. We just have to remember there is still a lot that is going to move by truck.”

There are several factors that determine whether trucking freight is a good fit to switch to rail intermodal, including the distance the freight is traveling and the time sensitivities of that freight. Costello said, “Generally, the freight must be going over 500 miles before it might be possible to move that freight to rail intermodal, but it might have to go at least 750 miles.”

Costello said the delivery window of that freight also comes into play. “If it has a fairly tight delivery window, say a day or less, the freight won’t move to intermodal,” he said.

Dan Murray, vice president of research for the American Transportation Research Institute, said ATRI’s recent study on the operational costs of trucking show that costs are “skyrocketing.” He added, “Our cost opportunity data seems to justify the movement of long- haul off the road.”

However, Murray told Stop Watch that while large companies are moving long-haul loads to rail, he doesn’t expect medium and small carriers to take freight to the rails.

Starks estimates that intermodal freight accounts for about 10 percent of long-haul freight movements. “There is still 90 percent moving by truck,” Starks said.

Petty said intermodal is “a minuscule amount of the total spend on transportation.”

Petty said private fleets are growing capacity and creating more assurance with their own equipment and drivers.

“Many shippers that have private fleets are making sure that they’re fine-tuning all of their routes and delivery cycles to optimize that capacity, and are outsourcing small amounts or in lanes where there are peaks and valleys of demand. They certainly are looking for other modes of transportation, including intermodal,” Petty said.

Petty said the shrinkage of truckload and the trend to shorter hauls will create a “bigger dynamic of more components, whether it is intermodal or private or dedicated working in a more dynamic fashion toward more optimization. Companies are looking for the best value and efficiency, whether it is long-haul, intermodal or private fleets.”

Manufacturers, Shippers Turn To Regional Distribution
A growing number of manufacturers and shippers are changing their distribution networks in order to move products to consumers faster. For many, that means an increased number of regional distribution centers, which is changing traffic patterns and lengths of haul. Learn more about the top distribution center trends in an online-only article Manufacturers, Shippers Turn to Regional Distribution.

This article originally ran in Stop Watch magazine. Stop Watch provides in-depth content to assist NATSO members in improving their travel plaza business operations. The magazine is mailed to NATSO members bimonthly. If you are a member and not receiving Stop Watch, submit a request to be added to the mailing list. Not a member? Join today or submit a request to receive additional information.

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