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Transportation News Bulletins - LTL and TL

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Retail gasoline prices match 2010 high, oil up 18% in last month
Monday, 08 March 2010 00:00

Motorists are well down the road to higher pump prices as warmer weather and the driving season approaches.

Average retail gasoline prices, continuing a surge that started last month, have now matched their 2010 high on the way to prices that many analysts believe will top $3 per gallon this spring.

The nationwide average retail gasoline price rose 0.6 cents Monday to $2.753 per gallon, virtually identical to the high water mark of $2.7583 reached on Jan. 14, according to auto club AAA, Wright Express and Oil Price Information Service.

Prices have risen 9.2 cents in the last month and are now 80.6 cents higher than levels of a year ago.

The Energy Information Administration, which is among those predicting $3 gallon gas this spring, will release figures on nationwide retail gasoline prices later Monday.

The jump in retail prices follows an increase in wholesale gasoline prices. April contracts on the New York Mercantile Exchange rose 1.77 cents to $2.2887 per gallon. Friday's settlement price of $2.271 per gallon was the highest settlement price for gasoline since Oct. 1, 2008, according to Peter Beutel of Cameron Hanover.

An 18 percent rise in oil prices over the past month that pushed crude near a 2010 high of $83.95 per barrel is also boosting gas prices.

Part of the increase in gasoline prices is seasonal. Prices typically go up in the spring as refiners switch to more expensive blends of gasoline. Demand usually picks up as motorists emerge from hibernation and hit the road.

But things may be different this year. The U.S. remains well supplied with gasoline and oil, so there is no prospect of a supply shortage driving up prices. Also, the high unemployment rate and uncertainty about the economic recovery have kept demand for gasoline about where it was a year ago.

Benchmark crude for April delivery rose 44 cents to $81.94 a barrel on the Nymex. Earlier in the session, it peaked at $82.41. The contract rose $1.29 to settle at $81.50 on Friday.

In other trading in April contracts, heating oil rose 1.10 cents to $2.1084 a gallon. Natural gas fell 8.7 cents to $4.506 per 1,000 cubic feet.

In London, Brent crude gained 52 cents at $80.41 on the ICE futures exchange., 3/8/2010

CSA 2010 Will Bar Many Drivers, Affect Shippers, TCA Warned
Monday, 08 March 2010 00:00

LAS VEGAS—Already expected to eliminate several thousand truckers from the driving pool, the federal government’s new truck safety rating system is likely to threaten the career of thousands more, as well the fortunes of many fleets, carrier executives and others familiar with the program said.

Truckload executives meeting here were told that changes in their operations—and relations with shippers—could be required to maintain strong safety scores when the Comprehensive Safety Analysis 2010 regulation is implemented later this year.

The Federal Motor Carrier Safety Administration plans to begin implementing CSA 2010 in July.

“It is clear a lot of carriers were late to recognize the scope of CSA 2010,” Chris Burruss, president of the Truckload Carriers Association, said in an interview during the group’s annual meeting here Feb. 28 to March 3.

Kevin Burch, outgoing TCA chairman and president of Jet Express Inc., said CSA 2010, along with economic recovery and an aging workforce, was part of “a perfect storm” that would rapidly bring the driver shortage issue back to the forefront.

Gregory Feary, a managing partner at the law firm Scopelitis, Garvin, Light, Hanson & Feary, Indianapolis, said CSA 2010 could make driver retention more expensive, because all carriers will look for the higher-rated drivers, who also might seek better-paying positions with competitors.

Feary compared highly rated drivers to free agents in professional sports who can command signing bonuses because of their talents.

Jeffrey Davis, vice president of safety and human resources for Jet Express Inc., Dayton, Ohio, offered a blunt assessment of the burden facing the industry.

“We are asking drivers not to avoid [being placed] out of service [during inspections] but to be perfect,” he said. “Every single defect will hurt the driver and carrier.”

With each inspection generating data and posted on the Web, some executives said safety ratings could change rapidly.

“You have to understand the pressure that will be on your safety departments,” Davis said at a CSA 2010 overview session during the event.

Carriers viewed as less safe are far more likely to face additional inspections and a cycle difficult to break, with more pressure on maintenance personnel.

“With the amount of data involved . . . you are going to have to readjust your workforce,” Davis warned.

Steven Bryan, CEO of Vigillo LLC, a company offering driver safety scorecards endorsed by American Trucking Associations, told TT that many fleets could be surprised to see how they are viewed under CSA 2010.

He said 76% of the fleets providing data to Vigillo—fleets staffed with more than 400,000 drivers—are over the threshold in at least one procedure that could trigger an enforcement action.

Statistics show that the cargo securement is an issue demanding particular attention, Bryan said. The issue also was of concern to new TCA Chairman John Kaburick.

“Under CSA, a fleet would receive as many points for cargo securement as [for] driving drunk,” said Kaburick, who is president of Earl L. Henderson Trucking Co., Salem, Ill.

The importance of the cargo securement was one of many topics addressed during a meeting of TCA’s Carrier-Shipper Relations Committee.

Members including committee chairman Jim Ward, CEO of D.M. Bowman Inc., Williamsport, Md., said CSA 2010 would make it even more important that shippers try to provide more flexibility with delivery times.

Shippers also should be willing to allow drivers to park at their facilities if they arrive early or remain on the grounds until off-duty time ends, especially if they have long wait times.

Trucking executives also discussed the need for shippers to provide more leeway on loading docks and with routing.

“Some shippers load based on complex formulas to maximize loads, and that is great. However, we are not all operating the same equipment,” said John Pope, CEO of Cargo Transporters Inc. Claremont, N.C.

To protect drivers, loading docks should be prepared to occasionally make small, last-minute adjustments, he said.

Likewise, small errors on bills of lading or accidentally routing a driver along a portion of a restricted highway—where the driver then is pulled over—could have lasting effects on safety ratings.

“These things not only affect carriers but also directly the professional drivers, so it is even more important shippers and carriers act responsibly on their behalf. Their careers could be on the line,” Ward said.

Janet Kemp, manager of carrier operations at U.S. Gypsum Corp., Chicago, attempted to sum up the view of shippers: “It is everyone’s best interest that shippers work with carriers to correct what needs to be corrected now. Shippers have to play their part.”

Stacey Stivers, transportation technology manager at Frito-Lay Inc., Dallas, said the company is reviewing ways to “fine-tune its operational practices” in response to CSA 2010.

Kemp added that shippers feel there is some “mystery” in CSA 2010 scoring, and they are unsure how to accurately measure carriers.

Still, Kemp said she knows it will affect shippers, a point recently underscored by former Federal Motor Carrier Safety Administration chief Annette Sandberg.

John Larkin, an analyst with Stifel, Nicolaus & Co. Inc., wrote to clients after a conference call last month: “Sandberg thinks that FMCSA is not adequately considering the implications of their new system on the nation’s supply chain.”

Transport Topics, 3/8/2010

LTLs Can Reduce Expenses With E-Billing, Experts Say
Monday, 08 March 2010 00:00

TAMPA, Fla.—Less-than-truckload carriers can realize substantial savings if they manage to end the prevailing industry practice of preparing freight bills on paper and convert the process to electronic transmissions, industry officials and experts said. LTL carriers that fill out about 85% of their freight bills on paper spend roughly six times more money to prepare those forms than parcel carriers that receive almost all of that data information electronically, Satish Jindel, who heads SJ Consulting, told Transport Topics.

Speaking at the Distribution and LTL Carriers Association meeting here March 2, Marc Mitchell, transportation practice director for Enterprise Information Solutions Inc., highlighted both the potential payoff of switching to electronic bills of lading and the difficulty in changing habits.

“An LTL move starts now with a guy at the shipper’s dock calling up a carrier and saying, ‘Come and get this. I don’t have a bill of lading to give you right now,’ ” Mitchell said. “Unfortunately, that’s the nature of the beast.”

Savings result from the reduction in errors, he said.

“The more people and paper that are involved in a move, the more risk there is and the more potential there is for failure and higher cost,” Mitchell said.

Jindel said parcel carriers’ administrative costs are 15 cents to process a single bill electronically, while that expense can approach $1 when an LTL carrier does a bill of lading on paper.

There are other savings from switching to electronic information.

“Electronic manifests can give the LTL carrier better advance planning for the linehaul network,” Jindel told TT. “They will have information earlier to manage the delivery at the destination.”

Shippers’ habits will dictate the ability to change from paper to electronic manifests, two carrier officials said.

“The challenge is to put more responsibility for inputting information on the shipper,” said Michael Moran, vice president of Moran Transportation Corp., Elk Grove Village, Ill. “Our goal is to do that through EDI [electronic data interchange] and to try to get them to use our Web technology. We are going to really push that.”

Moran Transportation, which intends to move electronic bills of lading in about 60 days, is on the other end of the process in its warehouse operation, where its workers are required to provide UPS Inc. and FedEx Corp. with package manifest information electronically.

“We would like to drive as much as possible to electronic bills of lading, but the customer sets the standard for what we have to do,” said Marlin Kling, president of Midwest Motor Express, Bismarck. N.D.

“We’re looking for internal savings in technology,” Moran said. “We can only go so far. We need to get more revenue for what we are doing. We are not magicians. How much do shippers want us to keep scaling back?”

A logistics manager said the carriers are slow to change.

“I’ve looked at electronic manifests,” said Dawn Reichert, logistics manager for shoe manufacturer Wolverine Worldwide Inc. Speaking at a February investor conference, Reichert said that she would be interested in shifting to that approach. “We are pretty much required by the carriers to do paper manifests.”

A key benefit from the change to EDI is standardization.

“The key is to focus on technology and machine-to-machine redundancy in communications,” Mitchell said, as the best way to streamline procedures.

Electronic transmissions by themselves don’t guarantee success, he added, because carriers can use the wrong EDI standards to move information, such as delivery receipts.

Another EDI issue, he said, was the absence of implemented standards that cover such problems as a shipment that couldn’t be delivered.

American Trucking Associations’ Information Technology & Logistics Council has led efforts to create that missing EDI standard, Mitchell said, though it hasn’t yet taken effect.

He and others said that paper—and people—always would have a role in trucking.

“We are never going to eliminate paper,” Mitchell said. “We have to use it effectively. The notion is not to put a computer between people.”

For example, he said a computer could not convince a customer to give freight to a carrier.

Robert Kortenhaus, president of Bilkays Express Co., Elizabeth, N.J., agreed that personal communications still are critical.

“We have computers that do everything but dance with the customers, but they still call about their freight,” he said. “There needs to be more of a personal relationship. A lot of information that people need just doesn’t move over a data line.”

Transport Topics, 3/8/2010

IRS, Labor Dept. to Crack Down on Firms Misclassifying Workers
Monday, 08 March 2010 00:00

The Obama administration said it plans to begin a multimillion-dollar push to crack down on employers who misclassify employees as independent contractors.

The administration’s new enforcement effort, announced last month in a series of budget briefings, calls for the creation of a joint Department of Labor and Internal Revenue Service task force to identify and audit employers who avoid paying taxes.

The proposal calls for $25 million to target misclassification with 100 enforcement personnel and competitive grants to boost states’ incentives and capacity to address the problem, according to documents contained in the administration’s fiscal year 2011 proposed budget.

The new effort will “dramatically strengthen and coordinate federal and state efforts to address employer misclassification of workers,” Jane Oates, assistant secretary of the Labor Department’s employment and training administration, said at a recent news conference.

Nancy Leppink, deputy administrator for the department’s wage and hour division, said, “Misclassification of employees as independent contractors results in violations of any number of federal and state employment benefit and protection laws, and state and federal tax laws, including minimum wage and overtime violations.”

The Labor Department estimated that the crackdown will increase federal tax receipts by more than $7 billion over 10 years.

Brandon Borgna, a spokesman for American Trucking Associations, said it’s too soon to assess the potential effect the effort might have on motor carriers.

“This is really more about all businesses,” Borgna said. “It’s not specifically targeting trucking.”

However, last year ATA joined an industry lobbying group to ensure that proposed legislation did not harm the viability of the independent contractor business model. The use of independent contractors as drivers is common in the trucking industry.

In 2009, bills were introduced in the House and Senate aimed at toughening standards for employers using independent contractors.

Neither bill has advanced to a vote.

Sen. John Kerry (D-Mass.), a sponsor of the Senate independent contractor bill, said that under current law, employers are required to take certain actions on behalf of their employees, including withholding income taxes, paying Social Security and Medicare taxes, paying for unemployment insurance, and providing a safe and nondiscriminatory workplace.

“Employers are not required to undertake these obligations for independent contractors,” Kerry said in a speech in December. “When workers are misclassified, businesses that play by the rules lose business to competitors that do not play by the rules, and workers lose valuable rights and protections.”

Although it’s unclear how many workers are misclassified, a 2009 study by the Government Accountability Office said that as many as 30% of employers audited in nine states during 2000 misclassified at least some of their workers.

During tax year 1983, for example, IRS estimated that U.S. employers misclassified a total of 3.4 million employees, resulting in an estimated revenue loss of $1.6 billion in 1984 dollars.

The GAO study said that IRS faces challenges with its compliance efforts because of resource constraints and limits that the tax law places on its classification enforcement.

“DOL and IRS typically do not exchange the information they collect on misclassification, in part because of certain restrictions in the tax code on IRS’ ability to share tax information with federal agencies,” the GAO study said.

GAO also said that few states collaborate with the Labor Department to address misclassification.

However, IRS and 34 states share information on misclassification-related audits, as permitted under the tax code. “Generally, IRS and states have found collaboration to be helpful, although some states believe information sharing practices could be improved,” the GAO said.

The GAO study said that in the past, the Labor Department’s detection of misclassification generally resulted from its investigations of alleged violations of federal labor law or many complaints of nonpayment of overtime or minimum wages.

In the past, IRS generally has enforced worker classification compliance primarily through examinations of employers, but the agency also offers settlements through which eligible employers under examination can reduce taxes they might owe if they maintain proper classification of their workers in the future, according to GAO.

Transport Topics, 3/8/2010

LTLs’ Steps to Surviving Recession Include Monitoring Expenses, Assets
Monday, 08 March 2010 00:00

TAMPA, Fla.—For less-than-truckload carriers, surviving the worst recession in decades required attention to every part of the business, from asset management to equipment purchasing to pushing drivers to deliver more freight, company officials said.

Executives from fleets in New Jersey, North Dakota and several places in between outlined their survival steps at the Distribution & LTL Carriers Association meeting here on March 1.

They made their comments about an industry whose largest carrier, YRC Worldwide Inc. lost $899 million before taxes as its revenue fell 41%. During 2009, just one publicly traded LTL carrier was solidly profitable, and three major fleets have failed in the past two years—Jevic Transportation, Alvan Motor Freight and Mid-States Express.

“We are all here because we did what we had to do to survive a year that was challenging for everyone,” said Marlin Kling, president of Midwest Motor Express, Bismarck, N.D. “The wild card this year is what happens to the economy at the national level.”

Drawing on lessons that were learned during a Teamsters union contract dispute and strike during the 1990s, Kling said Midwest does audits of its assets to cull unproductive ones.

“If it didn’t contribute to current operations, we got rid of it,” he said. “We are very careful in focusing our investments. We focus on our equipment, which makes us the money, and our people.”

Midwest also benchmarks its performance against statistics that are disclosed in publicly traded carriers’ reports. In addition, the North Dakota company examined its costing system and revised its approach to allocating pickup and delivery costs.

Todd Gilbert, president of Valley Cartage, Hudson, Wis., said his company examined terminal as well as pickup and delivery costs at regular meetings. Valley also used Dun & Bradstreet credit information to avoid problems with receivables.

Kenneth Weinberg, vice president of sales at Carrier Logistics Inc., Tarrytown, N.Y., agreed about the value of accurate costing.

“People need to get back to basics,” Weinberg said. “Carriers have been too focused on revenue. People need to have information available to see their costs and know them. Look at actual costs per shipment and productivity on the street, like stops per hour.”

Some cost-saving moves involved trade-offs, some executives said.

When the fleet needed updating last year, Midwest bought late-model used tractors with as few as 90,000 miles, rather than new equipment, a saving of 55%. Kling said that move would require the company to manage how the fleet ages in the future.

“We have to think carefully about how to cycle through this equipment situation,” Gilbert said, because trade-in cycles are being extended at the same time lessors are buying fewer new tractors that eventually reach the used market.

“At some point, the used trucks are not going to be there,” he said. “Then, we are going to have some issues on our hands.”

In another example of tradeoffs, Evan Meyers, president of Meyers Transport, Ltd., Peterborough, Ontario, said the company managed to cut deadhead miles to 7% from 9%.

However, he noted that improvement carried a cost because the company had to take more and more marginal freight to fill the trucks.

“If you try to haul all the freight in the world, it catches up to you,” Meyers said. “Put the trucks up on blocks, and don’t operate them.”

Kling also encountered tradeoffs when he assigned two workers to watch broker load boards to find backhaul freight. After Midwest found some success with that approach, he said, some brokers started looking for freight from customers on his headhaul routes.

Robert Kortenhaus, president of Bilkays Express, Elizabeth, N.J., offered several ideas from different sectors of his business.

One was tax-oriented: Kortenhaus said he advised carriers to take advantage of tax law changes that permit carriers to reduce their taxes by using 2009 losses to cut the tax burden from earlier profitable years.

“Batten down the hatches,” he added. “Hold onto the cash.”

Another effective approach, Kortenhaus said, was for port drayage carriers to buy their own chassis instead of relying on ocean carriers to provide them. Owning chassis boosts the trucker’s productivity by cutting down on the time that’s wasted in port terminals while truckers hunt for chassis to match with containers, he said.

Referring to the driver, Kortenhaus said, “Give him more freight than he thinks he can deliver. If he has less freight, then it will take him the same amount of time.”

Transport Topics 3/8/2010

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