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Nov.10, 2014

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SURFACE & DOMESTIC TRANSPORTATION 60 THE JOURNAL OF COMMERCE www.joc.com NOVEMBER 10.2014 By Joseph Bonney ONE OF TRUCKING'S fastest-growing seg- ments, dedicated contract carriage, is feeling the effects of the same driver shortages that are hammering other parts of the industry. Paul Bowman, senior vice president of sales at U.S. Xpress, said his company's business planning centers on three priori- ties: "The first one is drivers — how do we find them and keep them? The second one is drivers, and the third one is drivers." Every time U.S. Xpress decides to allo- cate capital or resources, it first asks how the company's driver recruitment and retention will be affected, Bowman said. "It's by far the overarching issue within the context of our business," he said during a panel discussion at an Armstrong & Associ- ates conference in Chicago on third-party logistics. Industrywide revenue of truck f leets dedicated to specific customers has tripled in the last 20 years, said Richard Armstrong, CEO of Armstrong & Associates. He expects dedicated contract logistics to grow 4 per- cent this year and by 5 to 6 percent in 2015. "I expect that is going to be more and more the direction we are going," Armstrong said. Dedicated carriage's share of U.S. Xpress's approximately $1 billion in annual truckload revenue is 38 percent and rising, Bowman said. The company has added 450 drivers in the last 18 months to its dedicated f leet, which has more than 2,800 driv- ers. "It's a big portion of our growth plan," Bowman said. "It's the only portion of our business that's seeing net asset growth and net revenue growth across the business." Some customers are contracting for dedicated fleets to ensure access to truck- ing capacity, but others are doing so as part of a broader logistics strategy. But dedicated carriage isn't immune to the industrywide driver shortage. Thomas Scollard, vice president of Penske Logistics, said motor carriers converting a private fleet into dedicated contract carriage used to be able to count on keeping the private fleet's drivers. "Now when we get a new piece of business, we almost have to look at it as a greenfield operation," he said. "If it's a 100-driver operation, we're probably going to have to go out and hire 100 new drivers. That's just the landscape we're in today." Scollard said drivers have more options and no longer see dedicated fleets as neces- sarily easier than over-the-road, for-hire trucking. He cited driver dissatisfaction with irregular hours and weekend work, stressful working conditions, and pay that "is not commensurate with what we ask them to do." Some shippers allow their dedicated carrier to balance its loads with another customer's inbound freight, which reduces transportation costs for both shippers and improves utilization for the carrier. But waiting times at the additional stops can tie up truck capacity and anger drivers who are paid by the mile and aren't fully compensated for the additional waiting time to pick up and deliver the backhaul load. "Guess what the driver does when he comes back," Bowman said. "He puts the keys on the desk and says, 'I'm out.' " A fundamental cause of driver shortages is a "generational gap," and the industry needs to solve the problem of replacing older work- ers as they retire, Bowman said. Many new drivers in their early 20s are "just dabbling" in trucking before taking a job in construction or some other industry, he said. "From a generational perspective, we used to find a lot of individuals who kind of worked their life around their job. We're not finding that any more," Bowman said. "We're finding drivers are coming in and expecting the job to work around their life." Besides the long hours away from home, truck drivers no longer have the "entrepreneurial" feeling and sense of independence they once enjoyed, Bow- man said. The problem will intensify when electronic on-board monitors become man- datory next year, he added. Bowman questioned whether higher pay would solve the problem. "I don't know that money is going to fix it," he said. "There are a lot of really good $85,000-plus driving jobs out there that we're still struggling to fill." Todd Skiles, senior vice president of sales and marketing at Ryder System, said automation could provide an eventual solu- tion. The technology for driverless trucks, and the rapid advance of new technologies such as this, makes it all but inevitable, he said. "I'm not saying that there won't be people in the trucks," Skiles said, "but I truly believe they won't drive." JOC Contact Joseph Bonney at jbonney@joc.com and follow him on Twitter: @JosephBonney. DEDICATED? NOT SO MUCH Dedicated contract carriers have the same problem other trucking operators face: finding and retaining drivers "We used to find a lot of individuals who kind of worked their life around their job. We're not finding that any more."

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