Last Legs for Long-Haul Trucking?

[kscarbel2]

Jack Roberts, Heavy Duty Trucking  /  June 6, 2017

The long-haul model has been the dominant model for moving freight in North America for decades, but there are signs that could be changing, according to Magnus Koeck, vice president, marketing, and brand management for Volvo Trucks North America.

The long-haul model for freight distribution developed organically after the Second World War in an age of cheap diesel fuel, a large driver pool, and infrastructure limitations at the time: The Panama Canal was not able to accommodate larger freighters and a new class of container ships. This placed an emphasis on East and West Coast ports, with corresponding long-haul truck routes becoming the norm.

A lot of the pieces that set the long-haul freight model in place have changed dramatically over the past several years, however. The size of the driver pool has not kept pace with the rise in freight volumes. Moreover, a new generation of potential drivers sees the isolation and long periods away from home associated with long-haul routes as a distinct negative.

At the same time, the widening of the Panama Canal (with a new, Chinese-funded canal across Nicaragua under construction now) has made it easier for larger container vessels to reach Gulf Coast ports.

Industry experts tracking these trends have predicted they could lead many truck fleets to adopt short-haul, regional, or super-regional routes, leveraging port expansions on the Gulf Coast to get drivers home sooner, while still maintaining increasingly important efficient freight deliveries.

While there is still some ways to go before trucking sees a full-blown shift away from long-haul routes, Koeck sees signs the shift is underway. “We actually don’t see that happening yet in a larger scale as there are still some work to do (renovations, dredging, blasting and bridge raising) in some of the Eastern seaboard ports to be able to accommodate the largest container ships,” Koeck said. “The Panama Canal is ready, but some of the ports are not. The Panama Canal did open up in the end of June last year for larger ships. We’re monitoring the development closely and we’re confident that there eventually will be changes in the freight patterns because of this.”

Volvo reported last week at a press event unveiling its new VNR tractor that its Class 8 build number for 2017 is beginning to indicate a move toward more regional delivery routes by fleets, with production of long-haul spec’d trucks falling off by 5%, compared to 2016, while regional-spec’d truck production has remained steady.

“It’s hard to tell if this is a long-term trend or simply a market correction,” Koeck said. “We do see a declining trend for long haul and a steady, slight upward trend for regional haul, although we’re also positive that the long-haul segment will recover in the years to come and the construction segment will decline sometime after 2019.

"The regional haul segment stands for close to 30% today of the total market and that’s a strong number," he continued. "We truly believe that we are extremely competitive now with our new lineup of VNR tractors, reflecting that we have seen a higher demand for daycabs and smaller sleepers in the last few years.”

Another driver that could push growth in regional and super-regional markets is the increasing pressure for faster delivery times, including a new emphasis on efficient “last mile” delivery, although Koeck said it is again too soon to say for sure if those forces are fueling a significant shift in freight delivery patterns.

“The future will tell if this is happening now,” he said. “But our customers certainly have demands on them for quicker, on-time deliveries, and that trend will continue. We will see different business models for the future. Just see what has happened thanks to companies like Uber and Airbnb. Connectivity and digitalization are enablers for all this. Nevertheless, I believe that we will see long-haul trucks also in the future and it will be the dominant segment in the foreseeable future, but maybe in the context of different business models among our customers.”

For the time being, Koeck said the driver shortage, in his opinion, remains the main driver for shorter transport distances. “Younger drivers also have somewhat different values than older drivers,” he noted. “And they highly value time off with family and friends, meaning it will be harder and harder to recruit drivers just for long-haul operations. That’s also why we at Volvo put a lot of effort into making the best possible driving and living environments in our trucks, both for our long-haul and regional-haul products. We truly believe that our customers have a competitive advantage when they have Volvos in their fleets when it comes to recruiting drivers.”

[Underdog]

There is no driver shortage. There is a pay shortage. If drivers are expected to stay out out away from home, they should be compensated appropriately.

[Lmackattack]

Agreed on the pay shortage... Some of the guys I have spoken with that haul freight for the big companies are always commenting how they are sitting more than moving. With the ELD laws and unload appointment Bullshit that does not help either. How can a trucking company expect you to sit at a shipper or receiver for over a day and not get paid for the day.  A delay is one thing...but when a truck hits the dock it should be unloaded or loaded in the order it arrived at. if the dock is busy you wait. if not unload and go. if they are not reasonable consider it a refused load... I could not haul freight with all the stories I hear about sitting around without pay

[TeamsterGrrrl]

I'm in agreement too- OTR pay sounds good until you deduct for the high cost of truckstop food, motels when it's too hot and humid and freezing to sleep in the truck, etc..

[grayhair]

3 hours ago, kscarbel2 said:

At the same time, the widening of the Panama Canal (with a new, Chinese-funded canal across Nicaragua under construction now) has made it easier for larger container vessels to reach Gulf Coast ports.

And there is competition among the Gulf ports.  Work is now underway to replace the Corpus Christi Harbor Bridge. The new bridge will have much higher clearance and the channel is being dredged deeper to accommodate much larger ships. 

http://www.harborbridgeproject.com/

[Red Horse]

Surprised that the HDT article (Mr Koeck) made no mention of double stack rail.  Improvements associated with raising bridges to accommodate double stack containers on more rail routes has to be as big a factor as port improvements.  

While Volvo is making a lot of noise about their new regional tractor, IMO the market for class 8 tractors of the future may not be that great for the "large car high roofs".  Granted there will always be a need for "hot shot" or dedicated long haul trucks for certain routes/priorities,  too many factors seem to be lining up to make the regional tractor the predominant vehicle.

If Ford for example is to ever get back in class 8, it will be IMO in that low cost regional tractor that runs from the intermodal yard to the distribution center or final customer.

 All of this thanks  to the demise of American manufacturing.

[TeamsterGrrrl]

Trucking in the U.S. grew thanks to cheap access to an incredible highway system while the railroads deteriorated. That situation is now reversed, with our highway system being slowly abandoned while the surviving railroads are hauling more freight at higher profits then ever. Add in the shift of manufacturing to Asia and now the super-sized Panama Canal, and trucking is pretty much left with the short haul scraps the container ships and intermodal trains leave behind.

The new PanaMax container ships will now have access to ports within a days drive of most of America's population and will be making the transportation market for decades to come... Even the railroads are worried. Meanwhile, trucking is as asleep at the wheel as the railroads were as the Interstate System subsidized their trucking competitors. I'm still amazed that trucking is still satisfied with their obsolete 53 foot containers while those PanaMax container ships will be unloading literally thousands of 40 foot boxes in the ports... Double 40 combinations are doable on the American highway system, but trucking was too busy gutting drivers wages to bother lobbying for them.

[fxfymn]

Quote

All of this thanks  to the demise of American manufacturing.

That is a myth. The manufacturing sector accounts for over 1/3 of the US economy. What there is a lot less of is manufacturing jobs, mostly as a result of increasing productivity from automation. The good news is the jobs that remain tend to be on the higher end of the pay scale with automation replacing many of the lower pay scale positions.

Source:http://www.epi.org/publication/the-manufacturing-footprint-and-the-importance-of-u-s-manufacturing-jobs/#epi-toc-5

[BillyT]

Don't even know where to start! Will say that our members have ( as usual) nailed the real situation of freight in general truck, rail, and water! In the last year Tampa bay overhauled its infrastructure to accommodate the largest containers and cruise ship traffic! And guess where the enormous multimillion dollar cranes were built?! China of course! It's a win win for them! They build the cranes that accommodate their larger container ships that bring us the products that their exploited workers build for subsistanence wages! That we used to build here! Admittedly, there are products that don't require skilled labor to produce,toys assorted widgets ,but cranes!? I personally don't think exploited workers put the pride in workmanship that properly compensated workers do! FXFYMN mentioned automation, where are the robots and assorted machinery that make that possible built? It's ironic that I can recall bitching about products made in Japan! Ingersoll rand,air tools went offshore in the 70s! Power tools previously made in Japan,Germany, and Sweden are all now made in China! So they're stealing jobs all over the world! Sorry, I've gone of on one of my anachronistic rants! I'm gonna google Bucyrus Erie and see if they are still building cranes in Galion Oh, where I used to deliver!

 

[Marcel67]

Well I guess plants go on the train to from Miami to New York! What takes me 2 days to deliver takes 3 weeks by train! Poor little plants are all brown when they arrive 🤓🌹💐

[Quickfarms]

Well I guess plants go on the train to from Miami to New York! What takes me 2 days to deliver takes 3 weeks by train! Poor little plants are all brown when they arrive [emoji851][emoji257][emoji253]

Actually the railroads have brought back the old fruit express trains to haul time sensitive cargo and most out here are piggyback.

It is funny to see a train that is a mix of UPS and Fed Ex trailers

[Red Horse]

8 hours ago, Quickfarms said:

Actually the railroads have brought back the old fruit express trains to haul time sensitive cargo and most out here are piggyback.

It is funny to see a train that is a mix of UPS and Fed Ex trailers

 and don't forget JB Hunt!

[Quickfarms]

 and don't forget JB Hunt!

True but I was thinking about the irony of the two competitors on the same train

[Red Horse]

8 hours ago, Quickfarms said:

 

True but I was thinking about the irony of the two competitors on the same train

 

Good one-I missed that point.

Oh and Fxyfmn-I have to disagree- the mfg sector may be 1/3 rd of our economy, but what was it?   You can't pick up one item in five in Home Depot that is made in US.  More like one in 8? 10?.  Just look at the freight industry of 40 or 50 years ago.  The P & D section was a key piece.  Why?  because "stuff" originated here.  Today? Its all coming from China in containers. The "P" in P & D is gone.  Its all delivery from the DC after the container gets delivered and stripped.

I was in the great Stanley Works New Britain Conn facility a couple of years ago.  The only thing they make there now is steel tapes.  Everything else?  Gone.

[fxfymn]

I don't dispute that many items, particularly price sensitive consumer goods, are likely to be imported, but there is still a hell of a lot of stuff being built here too. Basically the world has made a significant change in our lifetime when we went from an analog to a digital world and it has had impacts that almost no one could foresee. I worked in a factory in Ashland, MA that made clocks powered by synchronous motors. It is gone now because virtually all clocks are now digital. The GM assembly plant in Framingham is gone because fewer workers can build more cars using robots so the capacity of that plant is no longer needed. We are building more cars than ever here, but they are built by far fewer workers. Here is what I found:

Top 20 Facts About Manufacturing

1. In the most recent data, manufacturers contributed $2.18 trillion to the U.S. economy in 2016. This figure has risen since the second quarter of 2009, when manufacturers contributed $1.70 trillion. Over that same time frame, value-added output from durable goods manufacturing grew from $0.87 trillion to $1.20 trillion, with nondurable goods output up from $0.85 trillion to $1.00 trillion. In 2016, manufacturing accounted for 11.7 percent of GDP in the economy. (Source: Bureau of Economic Analysis)

2. For every $1.00 spent in manufacturing, another $1.81 is added to the economy. That is the highest multiplier effect of any economic sector. In addition, for every one worker in manufacturing, there are another four employees hired elsewhere. (Source: NAM calculations using IMPLAN)

   With that said, there is new research suggesting that manufacturing’s impacts on the economy are even larger than that if we take into consideration the entire manufacturing value chain plus manufacturing for other industries’ supply chains. That approach estimates that manufacturing could account for one-third of GDP and employment. Along those lines, it also estimated the total multiplier effect for manufacturing to be $3.60 for every $1.00 of value-added output, with one manufacturing employee generating another 3.4 workers elsewhere. (Source: Manufacturers Alliance for Productivity and Innovation)

3. The vast majority of manufacturing firms in the United States are quite small. In 2014, there were 251,901 firms in the manufacturing sector, with all but 3,749 firms considered to be small (i.e., having fewer than 500 employees). In fact, three-quarters of these firms have fewer than 20 employees. (Source: U.S. Census Bureau, Statistics of U.S. Businesses) 

4. Almost two-thirds of manufacturers are organized as pass-through entities. Looking just at manufacturing corporations and partnerships in the most recent data, 65.6 percent are either S corporations or partnerships. The remainder are C corporations. Note that this does not include sole proprietorships. If they were included, the percentage of pass-through entities rises to 83.4 percent. (Source: Internal Revenue Service, Statistics of Income)

5. There are 12.3 million manufacturing workers in the United States, accounting for 9 percent of the workforce. Since the end of the Great Recession, manufacturers have hired more than 800,000 workers. There are 7.7 million and 4.6 million workers in durable and nondurable goods manufacturing, respectively. (Source: Bureau of Labor Statistics)

6. In 2015, the average manufacturing worker in the United States earned $81,289 annually, including pay and benefits. The average worker in all nonfarm industries earned $63,830. Looking specifically at wages, the average manufacturing worker earned nearly $26.00 per hour, according to the latest figures, not including benefits. (Source: Bureau of Economic Analysis and Bureau of Labor Statistics)

7. Manufacturers have one of the highest percentages of workers who are eligible for health benefits provided by their employer. Indeed, 92 percent of manufacturing employees were eligible for health insurance benefits in 2015, according to the Kaiser Family Foundation. This is significantly higher than the 79 percent average for all firms. Of those who are eligible, 84 percent actually participate in their employer’s plans, i.e., the take-up rate. Three are only two other sectors – government (91 percent) and trade, communications and utilities (85 percent) that have higher take-up rates. (Source: Kaiser Family Foundation) 

8. Manufacturers have experienced tremendous growth over the past couple decades, making them more “lean” and helping them become more competitive globally. Output per hour for all workers in the manufacturing sector has increased by more than 2.5 times since 1987. In contrast, productivity is roughly 1.7 times greater for all nonfarm businesses. Note that durable goods manufacturers have seen even greater growth, almost tripling its labor productivity over that time frame.

   To help illustrate the impact to the bottom line of this growth, unit labor costs in the manufacturing sector have fallen 8.4 percent since the end of the Great Recession, with even larger declines for durable goods firms. (Source: Bureau of Labor Statistics) 

9. Over the next decade, nearly 3½ million manufacturing jobs will likely be needed, and 2 million are expected to go unfilled due to the skills gap. Moreover, according to a recent report, 80 percent of manufacturers report a moderate or serious shortage of qualified applicants for skilled and highly-skilled production positions. (Source: Deloitte and the Manufacturing Institute) 

10. Exports support higher-paying jobs for an increasingly educated and diverse workforce. Jobs supported by exports pay, on average, 18 percent more than other jobs. Employees in the “most trade-intensive industries” earn an average compensation of nearly $94,000, or more than 56 percent more than those in manufacturing companies that were less engaged in trade. (Source: MAPI Foundation, using data from the Bureau of Economic Analysis) 

11. Over the past 25 years, U.S.-manufactured goods exports have quadrupled. In 1990, for example, U.S. manufacturers exported $329.5 billion in goods. By 2000, that number had more than doubled to $708.0 billion. In 2014, it reached an all-time high, for the fifth consecutive year, of $1.403 trillion, despite slowing global growth. With that said, a number of economic headwinds have dampened export demand since then, with U.S.-manufactured goods exports down 6.1 percent in 2015 to $1.317 trillion. (Source: U.S. Commerce Department) 

12. Manufactured goods exports have grown substantially to our largest trading partners since 1990, including to Canada, Mexico and even China. Moreover, free trade agreements are an important tool for opening new markets. The United States enjoyed a $12.7 billion manufacturing trade surplus with its trade agreement partners in 2015, compared with a $639.6 billion deficit with other countries. (Source: U.S. Commerce Department) 

13. Nearly half of all manufactured goods exports went to nations that the U.S. has free trade agreements (FTAs) with. In 2015, manufacturers in the U.S. exported $634.6 billion in goods to FTA countries, or 48.2 percent of the total. (Source: U.S. Commerce Department)

14. World trade in manufactured goods has more than doubled between 2000 and 2014—from $4.8 trillion to $12.2 trillion. World trade in manufactured goods greatly exceeds that of the U.S. market for those same goods. U.S. consumption of manufactured goods (domestic shipments and imports) equaled $4.1 trillion in 2014, equaling about 34 percent of global trade in manufactured goods. (Source: World Trade Organization) 

15. Taken alone, manufacturing in the United States would be the ninth-largest economy in the world. With $2.1 trillion in value added from manufacturing in 2014, only eight other nations (including the U.S.) would rank higher in terms of their gross domestic product. (Source: Bureau of Economic Analysis, International Monetary Fund)

16. Foreign direct investment in manufacturing exceeded $1.2 trillion for the first time ever in 2015. Across the past decade, foreign direct investment has more than doubled, up from $499.9 billion in 2005 to $1,222.9 billion in 2015. Moreover, that figure is likely to continue growing, especially when we consider the number of announced ventures that have yet to come online. (Source: Bureau of Economic Analysis)

17. U.S. affiliates of foreign multi-national enterprises employ more than 2 million manufacturing workers in the United States, or almost one-sixth of total employment in the sector. In 2012, the most recent year with data, manufacturing sectors with the largest employment from foreign multi-nationals included motor vehicles and parts (322,600), chemicals (319,700), machinery (222,200), food (216,200), primary and fabricated metal products (176,800), computer and electronic products (154,300) and plastics and rubber products (151,200). Given the increases in FDI seen since 2012 (see #15), these figures are likely to be higher now. (Source: Bureau of Economic Analysis) 

18. Manufacturers in the United States perform more than three-quarters of all private-sector research and development (R&D) in the nation, driving more innovation than any other sector. R&D in the manufacturing sector has risen from $126.2 billion in 2000 to $229.9 billion in 2014. In the most recent data, pharmaceuticals accounted for nearly one-third of all manufacturing R&D, spending $74.9 billion in 2014. Aerospace, chemicals, computers, electronics and motor vehicles and parts were also significant contributors to R&D spending in that year. (Source: Bureau of Economic Analysis)

19. Manufacturers consume more than 30 percent of the nation’s energy consumption. Industrial users consumed 31.5 quadrillion Btu of energy in 2014, or 32 percent of the total. (Source: U.S. Energy Information Administration, Annual Energy Outlook 2015)

20. The cost of federal regulations fall disproportionately on manufacturers, particularly those that are smaller. Manufacturers pay $19,564 per employee on average to comply with federal regulations, or nearly double the $9,991 per employee costs borne by all firms as a whole. In addition, small manufacturers with less than 50 employees spend 2.5 times the amount of large manufacturers. Environmental regulations account for 90 percent of the difference in compliance costs between manufacturers and the average firm

- See more at: http://www.nam.org/Newsroom/Top-20-Facts-About-Manufacturing/#sthash.RnentlHb.dpuf

[Red Horse]

Thx-good info to go over.

[BillyT]

As I have mentioned in my previous rants not one power tool in Home Depot or Lowe's is made in America including iconic brands like Milwaukee everything in "China Freight" is foreign made! Why do you think their main location is in Camarillo Ca? Cheap labor, and cheap shipping from China! I agree with FXFYM on many points, but the whole situation is too complicated for even formally educated folks to totally comprehend! I have found several products that are American made,but you have to look for them garden hoses for whatever reason are mostly US made! Harper hand trucks are made here! Why they don't put big made in USA  logos on their stuff puzzles me! Also,Milwaukee,hides the made in China markings on their tools,obviously trying to milk their previous image! They sure haven't lowered their prices! They say "engineered in America, made in China?" Are they ashamed?They should be! I also noticed they have come out with some cheaply made grinders and drills!,unlike their notoriously heavy older tools!

[BillyT]

One of the reasons we may have less.manufacturing is the lack of skilled tradespeople!  And the push to send everyone to college! and the stigma of working with your hands! My youngest sons college buddies dad owns a furniture factory in Rocky Mount NC, he paid the highest wages in the area,but,couldn't get local people who would come to work on time,and take pride in their work! So two clean cut Hispanic guys apply for work and he says you can start at 10.00 per hrs and in  90 days you go up to 12.00 (this is in1995) and the one guy came around his desk and hugged him! Is this a wake up call to American workers or what!

[Red Horse]

1 hour ago, BillyT said:

One of the reasons we may have less.manufacturing is the lack of skilled tradespeople!  And the push to send everyone to college! and the stigma of working with your hands! My youngest sons college buddies dad owns a furniture factory in Rocky Mount NC, he paid the highest wages in the area,but,couldn't get local people who would come to work on time,and take pride in their work! So two clean cut Hispanic guys apply for work and he says you can start at 10.00 per hrs and in  90 days you go up to 12.00 (this is in1995) and the one guy came around his desk and hugged him! Is this a wake up call to American workers or what!

You have to appreciate what Trump said in his cabinet meeting this week.  Just what we need-vocational training and expanded apprentice programs.    when loons like Bernie spout off about everyone having a .."right to a college education", I say.."In What"? Philosophy?    Eastern European Literature?  I don't think so.  

[TeamsterGrrrl]

They don't call them vocational schools, now they're technical colleges... That's the colleges Bernie was talking about.

[Keith Pommerening]

5 hours ago, TeamsterGrrrl said:

They don't call them vocational schools, now they're technical colleges... That's the colleges Bernie was talking about.

Glad you know what Bernie is talking about.  Bernie doesn't know what Bernie is talking about.  Going to be fun to watch what he does with his money now that he is a member of the millionaires club.  

[grayhair]

And in so many companies there is a reluctance by senior management to pay top-dollar, generous compensation to hire and keep gifted R&D engineers.  I worked for a smallish manufacturing company, about 1,500 employees and $400 mil annual sales.  Half of all sales revenue came from products that were introduced in the last 5 years.  Continuous innovation, dozens of new patents filed every month.  A continuous flow of new products designed to help our customers make more money in their manufacturing businesses.  Once upon a time Kodak knew the value of innovation, and so did Xerox, and so did Bill Hewlett and David Packard of HP.  All of these companies lost their way.  Once were innovators, then milked the same cows too long.

If you keep milking the same old cow, eventually the cow gets old and your business dies, replaced by a hard working competitor with a younger more productive herd.  He will be focused on growing his business by better serving the customers that were once yours. 

Edited June 16, 2017 by grayhair

[TeamsterGrrrl]

2 hours ago, Keith Pommerening said:

Glad you know what Bernie is talking about.  Bernie doesn't know what Bernie is talking about.  Going to be fun to watch what he does with his money now that he is a member of the millionaires club.  

I did a research paper on free tuition for the first 2 years of public college in Minnesota. Could be accomplished with little additional spending as our Minnesota State Colleges and Universities tuition is about the same $$$ as the Pell Grants. We're also giving free tuition to citizens over 60 at almost no cost on a space available basis, so filling a few more chairs in the classroom or adding more students online costs almost nothing.

[Keith Pommerening]

I think they put those 60+ year olds in the rooms so the kids can be exposed to some inteligence and life experiences.

[TeamsterGrrrl]

1 hour ago, Keith Pommerening said:

I think they put those 60+ year olds in the rooms so the kids can be exposed to some inteligence and life experiences.

More like so they can catch up with the kid's skills... The kids seem to have no problems with the metric system and electronic engine controls.