Transportation Guide -- Trucking Companies Carry a Heavy Load

The trucking industry is one of the most integral parts of the U.S. economy. Shipping raw materials to the manufacturing plants and delivering the finished product to the store appears to be a simple enough procedure. However, this economic model is a vital link that keeps the U.S. economy running at such a strong clip.

For the scrap recycling industry, transportation—and especially the trucking industry—is one of the most important, as well as misunderstood, segments of the business. Due to the commodity nature of recyclables, it is essential for material to be moved quickly. And, due to the thin margins that scrap recyclers typically have to work with, the keys are volume and movement. Companies have to move material quickly and at a relatively inexpensive rate to make it worthwhile.

For scrap consumers, trucking companies are essential if reduced inventories are a goal. The trend away from carrying high inventories means consumers require steady amounts of material to be delivered. Many consumers are also finding trucking operations a crucial component to successfully implementing a just-in-time (JIT) approach.

Truck transportation is a key avenue for this success. This segment is successful in both its ability to work with straight contract arrangements, as well as in situations where spot orders and emergency shipments are required. When it comes to timing, the trucking industry offers far and away the best response. One of the great advantages is the quick turnaround possible with trucking companies. Being able to shuttle material in and out in a minimal time span is an ideal approach to filling the gaps in the shipment schedules.

With trucks playing such an integral part of the overall operation, there are major problems that seem to linger with the trucking industry. One major problem is the continuing shortage of experienced drivers.

Most trucking companies say the largest challenge facing the trucking industry is the driver shortage. This is most acute with companies that require drivers to be on the road for days at a time.

The problem isn’t limited to smaller trucking firms. The problem cuts across the industry, from small operations with just a few trucks to the largest truck fleets in the country.

Schneider National, one of the largest truckload carriers in the U.S., does a significant amount of business hauling recovered paper throughout the Midwest. The privately held trucking company, despite running 11,000 tractors and between 34,000 and 35,000 trailers, still continues to struggle with driver shortages. "We are hiring people like crazy," says Kirk Thompson, a spokesman for Schneider. The company runs its trucks through Mexico and Canada as well as the U.S.

Trucking companies are addressing this problem in different ways. Many of the larger companies have full-time recruiters looking for more drivers. Other companies offer better benefit packages, and more flexible programs to encourage drivers to stay with their firms.

Regardless of the approach, most of those contacted say that, in the long run, it is less expensive to retain the existing drivers than it is to go out and recruit new drivers.

Another trucking executive points out truck drivers get "no respect." Far from a nebulous idea, he explains how the trucker’s time is not a consideration at many plants. "They may have to wait around for hours at a time. Meanwhile, most truck drivers get paid by the mile."

Putting it more clearly, one trucking company executive calls the driver shortage problem a lifestyle issue.

The irregular routes and days away from home are difficult for many drivers. Factoring in the pay, which in many cases is not great, leads to some difficulties with the trucking industry in maintaining a staff of drivers to meet the needs of the industry.

Operating in a highly competitive environment, where both suppliers and consumers are squeezing every last penny to maximize efficiencies, brings special challenges to trucking companies. And in the scrap segment, the inherent properties of the material being moved causes heavy damage for the equipment.

With all these problems, trucking companies continue to flourish in North America. And trucks, more than any other method of transportation, are the lifeblood of the recycling industry. While rail lines ebb and flow with equipment availability, trucking companies continue to be called on to ship the recyclables. And, with greater attention to reducing inventories and operate closer to just-in-time, pressure on the trucking companies to deliver material to the end consumer becomes even more critical.

"This is a low profit margin, high capital cost industry," says Harold Thiessen, vice president of marketing for R&R Trucking, a Hamilton, Ontario-based trucking company.

Building and maintaining a truck fleet is expensive, especially for those companies that specialize in hauling ferrous scrap and heavier metals.

There are around 423,000 trucking firms in the U.S. While that is a large number, according to the American Trucking Association more than two-thirds of the firms operate six or fewer trucks. Further, 78% of the trucking firms in the U.S. have less than 20 trucks.

Operating a trucking company successfully with a small fleet is challenging, the Association contends. Fuel costs, high insurance, the lack of drivers, a wide scope of regulation by the Department of Transportation, and the high cost of maintaining the fleet all work against many of the smaller trucking companies.

As for companies targeting the recycling industry, that number is minimal. However, many of the largest companies handle some recyclables, although most handle it strictly as a backhaul arrangement. Continued pressure to be more efficient is making Schneider National buy lighter, larger trailers to handle more material. According to a spokesman for Schneider, the company services many of the largest paper companies in the country, including Kimberly-Clark, Consolidated Paper and Fort James. The trucking company has a host of specialized equipment to handle the material.

While drivers are on the road travelling more than ever, the federal government is putting pressure on the trucking industry to lower the number of hours truckers are on the road. This puts even greater demands for more efficient use of time on the drivers and the trucking companies.

Trucks are typically able to carry, including the trailer, 80,000 lbs. Factoring the weight of the trailer, the weight of the shipment may stand at around 40,000 pounds.

With the pressure on trucking companies from all sides, the key for the companies is to make sure the trucks are constantly on the road. Carmen Mormeno, vice president of Jack Gray Transport, an Indiana-based trucking company, says that time is the most important asset for truckers. "We need more cooperation from the yards," Mormeno explains. By this, he feels that recycling yards have to quickly load the material into the trailer. This allows for the trucking company and the driver to make a more successful run.

Gary Carrocce, vice president of operations for R&J Trucking, Youngstown, Ohio, puts it more succinctly: "Time is money." The sooner the driver is on the road, the greater the opportunity he has for making money. On the down side, some truckers may end up waiting hours to accept or drop a load, Carrocce adds.

Another trucking company executive says that some scrap yards may have 20 trucks lined up waiting to be filled. "One scale is in operation and if a magnet breaks down the driver might have to wait several hours," he points out. "There are some yards we just won’t visit. It’s not worth it," the executive says.

The question is whether these yards are in the majority, or are they a small percentage of the overall scrap industry. For the one executive, there is a change to more up-to-date, well-run yards. However, there still are many less sophisticated yards that are problematic. These companies he tries to avoid.

Problems with the yards are not limited to long waits. Some trucking companies say the condition of some yards is such that flat tires and other damage to the rigs are a common problem. The cost due to downtime resulting from any damage could be significant.

Other trucking companies cite the need to keep trucks moving as the key to a successful operation. Bruce O’Neill, Jupiter Transport, Jupiter, Fla., notes that with the economy softening slightly there has been some softening in the movement of scrap. Further, O’Neill notes, "We are getting squeezed by the competition. While rates haven’t gone up, everything else has gone up."

This is a mantra more than one trucking company cites for the continued pressures with the trucking industry. Rates, for the most part, remain flat. Meanwhile, insurance, liability, fuel, labor and other costs continue to soar.

Furthermore, due to the nature of the commodity being shipped, many of the trucking companies have to continually either replace or repair their equipment.

Thiessen says he makes presentations to many mills stressing the importance of speeding up the time it takes to unload a trailer. Additionally, Thiessen offers suggestions on ways to reduce the cost to ship material, as well as improve the flow of material in and out of the facility. "They are very receptive to the presentations," he says.

Some suggested approaches are simple, Thiessen points out. One is running the trucks at staggered times, creating nighttime shipments when there is less congestion on the road. "Lots of our drivers prefer to drive at night," Thiessen points out.

Other trucking company executives agree to the importance of getting consumers and shippers on the same page with the trucking companies to make running more efficient.

Mormeno says that relationships built over time are essential to being successful.

With the constant pressure on trucking companies to keep the trailers moving, changing the time when the material is unloaded could allow for greater cost savings for the company, as well as the potential for more money for the trucking company.

To extend or not to extend is an important question for trucking companies. It’s no different for companies moving recyclables. Most transportation executives are quick to point out that trucks are most advantageous for hauls of less than 150 miles. Further out the trucking company doesn’t hold as strong an economic advantage. Rates for other modes of transportation start to become much more competitive. For some trucking companies the differences are reflected in the type of trailers they use.

For R&R Trucking’s Thiessen it means for longer hauls the company looks to have much lighter trailers to allow the company to put more weight in the trailer. However, for hauls where a driver can make multiple trips during the day, weight is not as important as durability. In this short-haul environment the trailers typically take more abuse.

For trucking companies moving recovered fiber the issues also are daunting. Not only is competition tight for the service, but prices for the raw material have been fairly low, cutting into the overall value of the truck shipment. Moving recovered fiber is almost exclusively a backhaul arrangement, whereby the scrap paper is loaded after the primary material has been delivered.

With the pressure to keep trucks on the road and avoid extended delays, demurrage charges start to play a more active role. Demurrage charges, while varying by company, are late penalties imposed for failing to unload a vehicle in a timely fashion.