Koerner: A couple of key challenges come to mind: First is driver turnover. We have historically not had that much of an issue, because our turnover numbers were in the 40 percent to 50 percent area. Now those numbers are in the upper 60 percent category and that is cause for great concern. Like most trucking firms, we are looking at a lot of different ways to reduce that number and some are working, but this issue will not go away for some time.
The second challenge that comes to mind is the cost of new equipment. Government mandated emission requirements have caused manufacturers to raise their prices again. Along with the two latest changes in engines has come a reduction in fuel mileage. To help overcome this and the high cost of fuel, we have added auxiliary power units to many of our new trucks and this adds another several thousand dollars.
Customers are somewhat understanding of their rates going up due to high fuel costs, but they are not nearly as receptive to our costs of equipment increasing. Unless we can find some way to pass this along, this will be an additional cost to an already very slim margin.
Abernathy: Rates have increased at 4 to 7 percent per year for the last three years, after increasing more than 2 percent annually only twice between 1980 and 2003. Our shipper customers are coming to us for technology to drive further efficiencies and immediately offset the increases. Shippers need technology that allows them to tap a critical mass of other shipper networks to drive broad efficiencies through optimal matching of freight with assets which minimizes empty miles and detention hours, thus creating cost containment and value to the overall transportation network.
Driver turnover is a difficult problem, but the overall driver shortage is our primary concern. Aside from recent fuel price spikes, increasing truckload (TL) driver wages have been the primary driver of escalating rates. Although TL drivers' wages have increased significantly to between $50,000 and $60,000 per year, it still hasn't been enough to fill all carriers' seats.
The American Trucking Associations has suggested the current shortage of 20,000 truck drivers will reach 111,000 by 2014. Transplace has recently raised for industry comment the suggestion for an H1-B style immigration program for long-haul truck drivers. We believe such as system would eliminate the shortage relatively quickly.
How have the mergers and acquisitions among transportation technology providers in recent years affected your decision to implement solutions?
Bostick: Over the last three years, I've seen little affect. This is the second company that I have used our particular TMS, LeanLogistics. They have allowed us to seamlessly transition from our 3PL to an internal transportation team. We have full visibility to our supply chain now. Also, several other internal departments now have access to more real-time information—that is, our CSRs can speak to a scheduled appointment and even accessorial costs. Our warehousing group can use it to schedule dock appointments, which the carriers can go on-line and make. So, again, the visibility is helping to have answers more quickly.
Parry: For the most part, we are fully installed with our major transportation systems both from an inbound and outbound perspective. We did decide to take a modular installation approach providing us with the ability to replace one segment or system without interrupting the entire network design.
We have two basic systems, Oracle Transportation Management for the inbound side and TMW for the outbound side. All of the other systems work underneath those two and are fully integrated. We have embraced the modular approach not only because of the mergers and acquisitions among the players, but to also provide us with the ability to play in the best of breed world.
How are you getting value from visibility in your transportation planning? Have you been able to impact revenue generation and cost management?
Reilly: The improved visibility has become an effective means of opening doors to new opportunities. Therefore, it has created an increase in revenue generation. We are now able to collaborate with carriers on the front end so they get involved in the planning process—getting the front end help to align their equipment and resources to support the business.