CSCMP's Supply Chain Quarterly
July 16, 2018
Forward Thinking

Capacity crisis (surprise!) hogs the spotlight at TIA annual conference

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Public, private networking chatter focus on the rate pain likely to come.

The main hallway at the Transportation Intermediaries Association (TIA) 40th annual conference in Palm Desert, Calif., was clogged Monday with attendees craning their necks, jostling for a better vantage point, and creating a near-impassable roadblock for folks looking to move to and fro.

The subject of the fuss was not a celebrity or some orange-haired politician. It was for sessions at TIA's two learning centers focusing on the worst truck capacity crisis to hit in at least 15 years, and maybe in the industry's history. Each learning center held enough chairs for about a dozen people. The size of the throng at each was perhaps three to four times that.

The interest was keen, and expected. TIA members—mostly property brokers, freight forwarders, third-party logistics (3PL) providers that do brokerage, and the burgeoning group of IT providers that sell to brokers, forwarders, and 3PLs—live and die by the truck. Rail intermodal executives were in attendance to pitch an alternative mousetrap, something that hasn't been seen much at TIA meetings. Though brokers' use of intermodal was up 3 to 4 percent from a year ago, according to data from Cary, N.C.-based transportation management systems (TMS) provider MercuryGate International, those attending the sessions did not appear keen on shifting their business to the rails.

Broker wariness toward using intermodal is divided into three buckets: Service reliability, lack of container equipment in markets where it needs to be, and too many moving parts—rail and dray—for broker comfort. Besides, the dray segment faces the same challenges of truck and driver shortages as its line-haul brethren.

One broker who looked like he'd seen more than a few business cycles said he shifted some business from over-the-road to rail, only to switch it back to truck. Asked by one of the session's moderators, Jim Perdue, intermodal product manager for MercuryGate, if it was because truck service on his lanes had improved, the broker replied, "No, I was making the best of a bad situation."

A "bad situation" seems like an apt description of the status quo. Some folks at the conference forecast truck rate hikes of 15 to 20 percent over the next 18 months. Moreover, they did so with a tone of acceptance and resignation that made one feel there was certainty behind the projections.

The default explanation for the rate hikes is the shortage of qualified truck drivers. Yet the industry actually added 17,000 net drivers in 2017, according to Damon Langley, director, solution delivery—BI optimization and value engineering for Cleveland-based TMS provider TMW Systems Inc. The problem, at least through the first four-plus months of 2018 as rates have blasted skyward, is the reduction in driver and fleet productivity. Macro factors—ranging from compliance with the federal government's electronic logging device (ELD) mandate to an acute shortage of truck stop parking to too many shippers and receivers still making drivers wait three hours or more to load and unload their shipments—are conspiring to keep wheels turning, on average, just 6.5 to 7 hours each day, well below the 11 continuous drive hours (with a 30-minute rest break during the first 8) within a 14-hour workday that the law allows.

Driver detention has become a real sore spot, with fed-up fleets and drivers becoming increasingly stingy with free time. Langley said fleets and drivers may insist on allowing no more than one hour of free time before charging detention fees, with that number shrinking to "no hours" at some point.

Another problem is that drivers exit the industry almost as fast as they enter it. Only about 15 percent of drivers last beyond their second year in the business, Langley said. Driver survival rates can be measured in milestones, Langley said. The first is 90 days, followed by six months, and then two years. A fleet that holds on to a driver for two years is likely to have a long-term employee, he said.

Drivers, especially owner-operators, don't do themselves any favors by an inability to manage their costs. Brent Hutto, chief relationship officer of Truckstop.com, a New Plymouth, Idaho-based truckload spot market load-board operator, who also moderated one of the learning center sessions, cobbled together a slew of data and found that about 75 percent of owner-operators don't know their costs per mile. Such an eye-opening statistic runs counter to the notion that an entrepreneur's strong suit is knowing where every dollar is going, Hutto said.

All of this chaos might seem to be a golden opportunity for railroads to make themselves shine for brokers. Recognizing this, TIA has developed a tutorial for its members on the ins and outs of intermodal service. Yet the railroads can't seem to get out of their own way, as evidenced last month when the U.S. Surface Transportation Board (STB), which oversees the remnants of rail regulation, asked the seven big railroads to submit what are known as "service outlooks" for the near-term period and for the rest of the year. The STB agency said it is "increasingly concerned about the overall state of rail service," noting that average train speeds had declined noticeably, while average terminal dwell times had risen.

On a separate panel at the TIA conference with brokers, draymen, and IT providers, rail intermodal executives acknowledged they need to improve service, especially the speed of throughput at the notorious Chicago chokepoint, and they pledged to aggressively court brokers with promises of a truck-like service they can consistently depend on. "Our mission is on-boarding new brokers," said Sam Niness, president of Thoroughbred Direct Intermodal Services Inc., a unit of Norfolk-based rail Norfolk Southern Corp.

Shawntell Kroese, vice president of Loup Logistics, a newly reconstituted intermodal unit of Omaha-based Union Pacific Co., said the company will purchase containers and chassis during the year to respond to concerns over equipment shortages and imbalances. To hear the intermodal executives tell it, chassis availability is a more acute challenge than containers. "We had enough boxes, but not enough chassis," said Todd Biscan, director, intermodal sales for Jacksonville-based CSX Transportation Inc.

At the same time, Kroese cautioned the intermediaries in the audience that reliability cuts both ways. "We plan on your freight," she said. "We plan on the containers and the draymen." If the demand doesn't materialize as promised and expected, then the relationship could be compromised, she said.

Mark Solomon is executive editor—news at DC Velocity, a sister publication of CSCMP's Supply Chain Quarterly.

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