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Carriers Less Pessimistic About Third Quarter
Monday, 27 July 2009 00:00

More trucking companies are not looking back on the first two quarters of this year, as pessimism in the industry subsides somewhat, according to a recent survey by the Ontario Trucking Association. The OTA's Business Pulse e-Survey, conducted between July 6 through 20, indicates that the industry has less of a dim outlook for the future. However, respondents are still unsure about the prospects ahead, with the majority saying that the U.S. and Ontario have yet to hit the bottom.

The gap between those carriers with a positive versus negative outlook for the third quarter was nonexistent, at 32 percent each. The second quarter had 43 percent in the pessimist corner and 27 percent on the optimist side. While sentiments about the economic environment are definitely improving each quarter, there are still 35 percent of carriers that are unsure about the coming quarter.

Carriers did seem hopeful about the Canadian economy overall, with 52 percent who believe the country has reached a bottom. At the beginning of last quarter, only 25 percent felt the country had hit bottom. However, the U.S. and Ontario, in particular, did not fare as well. Those who were not convinced that the U.S. and Ontario will start improving amounted to 66 percent and 54 percent, respectively.

"While the results may indicate that the economy is inching its way towards staunching the bleeding, things are still very uncertain, especially for Ontario," said David Bradley, OTA president. "What we are seeing is an indication that economic activity may have or may be approaching the point where it has found the bottom; we are not seeing signs of meaningful growth and recovery at this point. There are so many variables right now—the US economy, the recent appreciation of the dollar, the availability of credit—that continue to overhang our view of things. I would characterize our outlook as being slightly more hopeful than optimistic at this point."

Meanwhile, the percentage of carriers who think Ontario has reached bottom increased to 46 percent from only 19 percent in the second quarter survey. Also, more carriers are hopeful that southbound freight volumes will improve over the next months, with 26 percent this quarter, compared to 16 percent who anticipate further deterioration.

Still, the survey points out that carriers are concerned that their services are being underappreciated as a result of decreases in freight rates.

"Most carriers would say recent rate discounts are way overdone," said Bradley. "We can blame shippers for being greedy and taking advantage of the desperation that some carriers are feeling, through using tendering processes that pit incumbent carriers against illusory rates suggested by unproven carriers who may or may not be willing and able to provide the service at those prices, or by changing the rules of the game. We can blame them for using load brokers who have no accountability to the actual cost of hauling a load."

Another major issue the survey points out is overcapacity. The survey found that 34 percent said capacity in their sector had increased over the last quarter, while 31 percent said it had stayed the same. Sixty-six percent of carriers do not expect to add to the net number of tractors or trailers in their fleets, and more expect to reduce these numbers in the period ahead.

"There are simply too many trucks for the volume of freight," Bradley said. "The industry has been shedding capacity and will continue to do so, but the decline in volumes has out-paced the reduction in capacity."

"The major reckoning in terms of capacity is yet to come in order to bring some semblance of equilibrium to the supply-demand equation," said Bradley. "But, it will and when it does—maybe even before the recession is over—whatever the surviving carriers have given up in rates will have to be restored. As fast as rates went down, they can go back up again. The question now should be when the correction takes place, not if."

Truckinginfo.com, 7/27/2009

 
Diesel Gains 3.2¢ After Four Weeks of Decline
Monday, 27 July 2009 00:00

The average price of diesel fuel rose 3.2 cents to $2.528 a gallon after a four-week drop, the Department of Energy said Monday.

Still, the downturn left diesel’s per gallon cost $2.075 below the same week last year, when the price was $4.603, its second week of decline from the $4.764 all-time record.

Gasoline, meanwhile, rose 4 cents to $2.503 a gallon, also posting its first gain after a four-week drop, during which time it fell 22.8 cents.

Monday’s gas price was $1.452 below year-ago levels. Gasoline hit a record $4.114 on July 7, 2008.

Light & Medium Truck, 7/27/2009

 
The Wind Beneath Their Wheels
Monday, 27 July 2009 00:00

Alliances power regional LTL carriers past recession’s roadblocks toward recovery.

They may seem an odd couple at first glance: a southeastern less-than-truckload carrier with a hub-andspoke network and a New Jersey-based carrier with a hybrid LTL truckload business model But Milan Express and New Century Transportation say their differences translate into strengths as partners in a new inter-regional venture.

The carriers launched their “Lightning Alliance” this month to speed LTL freight between Milan’s Midwest and Southeast territory and New Century’s northeastern home market. It’s already helping Milan Express gain freight in a recession.

“We’re nearing 100 pricing proposals, and there are a few dozen already that are up and running,” said David A. Kramer, president of LTL at the Milan, Tenn.-based company.

Alliances that are important for regional LTL carriers when freight is plentiful and capacity is tight are even more so when they’re not. They not only provide access to new markets and customers, but also encourage existing customers to ship more freight.

“They allow you to grow your revenue without expanding your cost. That’s probably your biggest advantage,” said Charles L. Hammel III, president of Pitt Ohio Express, a Pittsburgh-based regional LTL carrier operating in the mid-Atlantic region stretching from Chicago in the west to Virginia and North Carolina in the south. “We’re able to offer our customers a bigger geography so they can spread out farther.”

Pitt Ohio is part of the Reliance Network, a multicarrier alliance formed last year that connects it with Averitt Express, Land Air Express, Lakeville Motor Express, DATS Trucking and Canadian Freightways and Epic Express in Canada.

The alliance is giving Pitt Ohio a much welcome boost in a year when its revenue is down 14 percent from 2008. Shipments that enter Pitt Ohio’s system from alliance partners “now amount to about 10 percent of our revenue,” Hammel said.

Hammel expects to see more alliances and partnerships among LTL carriers, especially smaller companies, in the recovery as well as the recession. Carriers are more willing to share information and even develop common technology platforms, he said.

“You used to never do that unless you had common ownership,” Hammel said.

It’s the result of a shakeout spurred not by the poor economy but by the arrival of new competitors in the LTL market. “We used to compete with regional and national carriers, but once FedEx and UPS entered the LTL market, that changed,” Hammel said. “We no longer have to be as good or better than another LTL carrier, we have to be as good as or better than the package carriers. That changed the game substantially.” 

At Milan, Kramer believes much of the new freight its alliance with New Century will generate will come from existing customers. “We have focused the entire sales effort so far on current customers,” he said. “We’re looking for additional density and pickups—if we can get three shipments instead of two, that’s a good thing.”

It’s tough to fatten lanes when freight is thin. “Shipment sizes are smaller, freight density is lighter across the board; it’s just the economy we live in:’ Kramer said. “We’re trying to gain a little extra line of haul.”

Milan, which had close to $200 million in revenue in 2008, operates in the Midwest from Ohio to Illinois and a part of Wisconsin and in the South from Mississippi to North Carolina. Its relationship with New Century began last year, when the Westampton, N.J.-based company began sending it freight.

New Century typically handles heavier LTL freight outbound and backhauls truckload freight to customers in the Northeast. The company doesn’t have the cross-dock terminal network typical of LTL carriers; instead, it delivers its freight directly.

Many of its shippers, however, had smaller LTL shipments headed to the South and Midwest—freight New Century couldn’t handle on its own. “They were saying no to some of the smaller shipments because they didn’t have an outlet and they can’t run a traditional pedal network for deliveries with their system,” Kramer said.

Milan became that outlet in the South and Midwest. “Instead of just picking up two or three larger shipments, they were picking up one or two large shipments and filling in with smaller LTL freight we would deliver for them,” Kramer said.

Now Milan is returning the favor, funneling LTL freight to New Century’s main facility in Westampton, NJ., from terminals in Columbus, Ohio, and Charlotte, N.C.

Inbound freight volumes from New Century have been growing consistently, Kramer said. He expects outbound volumes to rise. “Customers told us in no uncertain terms that greater opportunity exists for us if we would handle a larger geography,” he said.

Journal of Commerce, 7/27/2009

 
Last Year’s Diesel-Price Nightmare Teaches Fleets to Diversify Options in Buying
Monday, 27 July 2009 00:00

Diesel prices have dropped almost 50% since record levels last year, but fleets continue to work on cutting fuel costs, one of their largest expenses.

In the past, relying on one tool or technique may have been sufficient, but in the market today, carriers say they are combining many methods to ensure they save every possible penny.

From using fuel optimization software and tracking the futures market to setting specific fuel card parameters, many fleets are creating a check-and-balance system that, when put together correctly, lets them buy smarter. Some fleets are also employing new products and changing driver habits to maximize fuel efficiency.

“Fuel is now our No. 1 cost in our organization, even more than labor, and there is such uncertainty around it,” said Roger Placzek, vice president of sales and marketing for deBoer Transportation, Blenker, Wis.

To help minimize that uncertainty for the fleet’s 450 tractors, Placzek said he relies on telematric and fueloptimization software to track purchases.

“We’re able to be more competitive when we’re dealing with bids and proposals for our customers,” he said.

Placzek uses TMW Systems’ fuel optimization software—IDSC Expert Fuel—which overlays fueling locations with a fleet route and combines that with available networks and discounts to determine how much a trucker should buy at specific locations.

Since beginning to use Expert Fuel, Placzek has been buying less fuel on contract and more on the open market.

“The loss of the volume incentives has been outweighed by the advantages we’re incurring in buying off the retail market,” he said.

Fuel optimization software allows fleets to narrow purchases even if they have a contract with a chain.

“Within a chain, prices can vary 50 to 75 cents based on location and on the traffic volume at the truck stops,” said Chris Lee, marketing director at ProMiles, a fuel optimization software provider in Bridge City, Texas. Locations farther away from refineries and racks typically have higher prices.

ProMiles also allows users to select other truck stop services, such as parking or dining, to make the most of the stop.

“The fewer stops you make, the more you maximize the fuel purchase,” Lee said.

Optimization software allows fleets to price fuel net of taxes. Although higher fuel taxes in one state may make it seem like a driver is paying more at the pump, it will lower overall cost over time since fleets pay fuel taxes based on where they run.

“A price of $2.50 at one location could be less when you factor out taxes than a location that says $2.40 at the pump,” said Ben Murphy, vice president of optimization studies for TMW Systems, Beachwood, Ohio.

However, carriers that use an optimizer need to make sure the recommendations they receive are accurate.

“We see optimizers that should work in theory but make recommendations that aren’t in the best interest of the fleet,” said Brad Simons, president of Pathway Network, Simons Petroleum.

Jim Guldan, chief financial officer at J&R Schugel Trucking, said the company doesn’t use fuel optimization software for its 650 tractors, but instead purchases the majority of fuel with one vendor to obtain volume discounts and then tracks revenue and expenses to determine more accurate pricing for customers.

J&R Schugel relies on activity-based costing and profitability management software provider Transportation Costing Group, Rockville, Md., which provides tools to help fleets portray fuel costs, revenue and profitability for individual customers, specific lanes, shipments or even certain times of the day.

“The name of the game is to be current and accurate so that you can measure what the costs are. If you can’t measure what the costs are, you can’t manage them,” said TCG President Ken Manning.

Guldan also works with J&R Schugel’s Comdata fleet fueling card to create a restricted network for drivers.

As part of its services, Comdata, Brentwood, Tenn., works with customers to analyze the fueling network, examine past pricing information and determine the best stops for the fleet. “If you don’t have a fuel optimizer, you are forced to look at the historical data and then factor in the discounts to find the locations with the best prices,” said Tim Hampton, Comdata’s vice president of sales for the central region and vice president of energy services.

Hampton said fleets can set parameters so drivers are able to purchase fuel only at locations where they have secured discounts.

“This is ultimately a management decision for each business, but there is money to be saved by consolidating gallons, negotiating discounts and locking down your fuel card to a limited network,” Hampton said.

Rich Stecklair, vice president and general manager of universal sales for fuel card provider Wright Express, said fleets can combine the benefits of the cards with telematics devices that draw on Global Positioning System data to help fleets find the most convenient fueling locations.

“If you’re spending five minutes driving out of the way to save four cents on a gallon of fuel, the math doesn’t work,” Stecklair said.

Wright Express uses Web-based fuel calculators with mapping tools to direct drivers to the best fueling locations. If a driver buys fuel outside of his or her parameters, Wright Express alerts the fleet. Fleets also can use fuel cards and telematics to track driver behavior, eliminate fraud, improve routing and reduce speeding, all of which add up to greater savings and increased driver productivity.

“There is an endless list of checks and balances you can put in on that card,” said Glen Sokolis, president of the Sokolis Group, a fuel management and consulting company in Warrington, Pa. Fleets can limit the time of day, days of the week and how many gallons a driver can purchase—but Sokolis warns fleets not to set it and forget it.

“You still need to look at the physical transactions to make sure they make sense,” Sokolis said. He also advised fleets to review every fuel invoice to ensure the price quoted is the price charged.

Optimization software and historical data can help fleets determine where to fill up based on the direction prices are heading. When prices are increasing, fleets can shift purchases to locations that don’t move as many gallons, because their prices will rise more slowly.

“When prices are dropping quickly, you look for those locations that move a lot of fuel because they get shipments faster,” Murphy said.

Bulk fuel purchases may save fleets a few cents per gallon, Sokolis said, but he recommends that fleets factor in infrastructure and maintenance costs to arrive at the true price.

“Some fleets might spend a huge amount of capital to put storage tanks in, but they’ll never get a return on what they invest,” he said.

Sokolis noted that he recently helped a client in Florida to price tanks that needed to be replaced because of a change in environmental regulations.

“Between the cost of the tank, the construction and how much fuel they use, it would take them over 20 years to get a return, let alone if anything goes wrong or there are government changes that require them to change the tank,” he said.

Buying in bulk also ties up capital.

“If you take a load of 7,500 gallons of fuel at $3 a gallon, you’ve got $22,500 of capital sitting in the ground that it might take you three weeks to get through,” Sokolis said.

Fleets that benefit from buying in bulk and operating their own fuel islands still need to monitor how much fuel is received and dispensed. Fleet asset-management company EJ Ward, San Antonio, monitors inventory and fueling for its clients.

The company offers passive or active tracking of fleet vehicles with its telematics device, the CANceiver, to track odometer readings, maintenance needs, acceleration and braking patterns and more.

“What we are pulling off of the engine-control module is critical to how the fleet manages their fuel dispensing and how much fuel is being used on the vehicle,” said Troy Goldhammer, EJ Ward’s chief operating officer.

The company’s active tracking allows real-time information, while passive tracking occurs when a fleet fuels.

“With passive you have significant savings because you don’t have the monthly fees you would with a cellular network,” Goldhammer said.

In addition to buying smarter through software and telematics, fleets are also trying to buy less and reduce non-recoverable fuel surcharge miles.

“When things get tough, you have to start focusing hard on your costs,” said Steve Graham, vice president of purchasing at Schneider National.

Schneider has worked on reducing idling, limiting out-of-route miles and minimizing the number of miles between delivering one load and picking up the next one.

Improving overall fuel economy is one more way fleets can improve their bottom line. EJ Ward works with PressurePro tire pressure monitoring systems to improve mileage and reduce tire wear through proper inflation.

“We can provide data in real time to tell them they have a low-pressure reading on a tire sensor, and that data can be transmitted at the fuel control terminal or through the cellular network,” Goldhammer said.

EJ Ward’s system can dispense a limited amount of fuel or prevent fueling altogether if improper tire pressures haven’t been corrected.

Fleets also could turn to Evans Waterless Heavy Duty Thermal Coolant, which the company said improves fuel economy by 3%. Mike Tourville, general manager of Evans Cooling Systems, Sharon, Conn., said that figure is verified by the Type II Fuel Consumption Test conducted by the Program for Advanced Vehicle Evaluation at Auburn University.

“The coolant expands the engine’s capabilities and enables the fan to come on less, draw less horsepower and save fuel,” Tourville explained.

Don Cox, co-owner of Parke Cox Trucking in St. George, Utah, has taken several steps to reduce fuel use, including installing Airtabs on the fleet’s 50 tractors and nearly all of its 100 trailers. Airtabs are small, wishbone-shaped attachments that create a controlled swirl of air designed to reduce wind resistance.

“We first tested them a year ago on a couple of trucks. It wasn’t a scientific test, but we noticed an increase in the fuel economy and decided to add them to the fleet,” Cox said.

He said that adding the Airtabs, slowing the trucks down to 67 mph and experimenting with low-rollingresistance tires has boosted the fleet’s fuel economy by half a mile to the gallon—but he’d like to do even better.

“Our goal is to get to seven miles per gallon. Right now we’re at six and a half,” Cox said.

Transport Topics, 7/27/2009

 
ATA to Congress: Fuel tax is most effective way to fund infrastructure
Friday, 24 July 2009 00:00

ARLINGTON, Va.—The American Trucking Associations (ATA) on Thursday told the Subcommittee on Select Revenue Measures, House Committee on Ways and Means, that the federal fuel tax remains the most cost-effective way to fund essential highway infrastructure projects.

In her statement on behalf of ATA, 2nd Vice Chair Barbara Windsor said that an increase in the fuel tax— with the additional revenue invested in projects and programs that address national highway infrastructure needs—is by far the best way to ensure sufficient funding for highway projects over the near term.

“With collection costs at just 0.2 percent of revenue, no alternative funding schemes can match the efficiency or equitability of the federal fuel tax,” said Windsor, who is President and CEO of Hahn Transportation, based in New Market, Maryland.

ATA maintains support for the federal fuel tax because it offers minimal opportunity for evasion can be collected and enforced without imposing excessive administrative and recordkeeping burdens on highway members; is based currently on readily verifiable measure of highway and vehicle use; remains uniform in application among classes of highway users; and does not create impediments to interstate commerce.

Windsor explained that highway funding schemes like tolling, vehicle miles traveled taxes or publicprivate partnerships do not stand up to the criteria for viable highway funding and provide a minimal return on the highway user’s investment.

A strong transportation system is the backbone of our nation. Trucking pays 33 percent of state and federal highway user fees, but logs just 14.4 percent of annual vehicle miles traveled on our highways. In addition to the federal fuel tax, trucks contribute to the system through a Heavy Vehicle Use Tax paid on all trucks above 55,000 pounds, a sales tax on all trucks and trailers, and a tire tax paid on all tires sold by manufacturers, producers or importers.

Windsor also said that the climate and energy legislation recently passed in the House is likely to significantly increase the cost of fuel. This increase would impose significant costs on American consumers and jeopardize the ability of the trucking industry to fund both the highway infrastructure that is greatly needed and also absorb the added costs to fuel brought by climate and energy legislation. It is important to note that improving highway infrastructure will decrease fuel consumption and carbon output by both cars and trucks.

TheTrucker.com, 7/24/2009

 
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