Economic and regulatory pressures are making it tough for port drayage drivers to earn a living. If they turn in their keys, who will haul the containers?
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Drayage drivers are the unsung heroes of our nation's import-dependent economy. They wait in long lines to pick up and drop off the millions of ocean containers that pass through U.S. ports each year. They spend long days shuttling containers between ports, intermodal terminals, and shippers' premises.
Most are owner-operators who work as independent contractors for small, locally owned trucking companies. Typically, they bear the cost of operating and maintaining their tractors, and they have no health insurance or pensions. Many are immigrants whose legal status is not always clear. And if anecdotal evidence is correct, more and more of them are turning in their keys, parking their trucks, and walking away from what has become a pretty shaky way to make a living.
These hardworking drivers are becoming an endangered species. If enough of them decide to get out of the business, something else will become endangered: ready availability of service at prices exporters and importers are willing to pay.
Hard times
Like everyone else who buys or sells transportation services these days, drayage drivers are trying to cope with unfavorable economic conditions and regulatory changes. One of their biggest worries is the cost of diesel fuel. An early 2007 survey of drayage drivers serving the ports of Los Angeles and Long Beach found that fuel costs ate up more than one-third of independent owner-operators' gross incomes. At the time of the survey, diesel was $2.87 a gallon; with prices now exceeding $4 a gallon in Southern California, that percentage unquestionably is far higher now.
Because drivers typically are paid by the trip, port congestion can be an enormous drain on income. A 2007 study of drivers at the Port of Seattle found that a local one-way haul paid $40 to $50 on average, and round trips were about $80. To make any sort of living at those rates, drivers need to make at least a couple of round trips daily. But just a few years ago, drivers in LA/Long Beach were lucky to make two turns in a day.
The situation has improved considerably, thanks in part to the PierPass appointment system, and night and weekend hours at container terminals. "Productivity has improved by approximately 50 percent since PierPass and extended gate hours went into effect," said Rick Wen, vice president, business development for Hong Kong-based container line OOCL, in a recent address at the Coalition of New England Companies for Trade (CONECT) Annual Northeast Trade and Transportation Conference. At that event, which was held in Newport, R.I., in March, he predicted that port congestion was likely to ameliorate even further as the U.S. economy slows down and import volumes decline. But long wait times could return if LA/Long Beach dockworkers and management continue to disagree over proposed changes in labor scheduling, or if they fail to sign the next labor contract by the July 1 deadline.
Port congestion has had other consequences for companies that hire drayage drivers. When container traffic shifts away from congested ports and spikes in other parts of the country—as it has at East and Gulf Coast ports and inland intermodal parks in the past few years—there may not be enough drivers ready to go to work when shippers and carriers need them.
In rural Chambersburg, Pa., for example, carriers are desperate for drayage drivers at the intermodal rail terminal that opened there last year, said Ken Kellaway, executive vice president of RoadLink USA, North America's largest intermodal company. Speaking on a panel with Wen, Kellaway said that carriers are trying to get people off their farm tractors and into trucks. Shifts in port usage patterns have made planning and scheduling difficult for drayage companies, he added. "Where do we need more trucks and drivers? The East Coast or the West Coast? We don't really know because [demand] keeps changing."
Regulatory burdens
Federal, state, and local regulations are adding to drayage drivers' frustrations. The Transportation Security Administration's Transportation Worker Identification Credential (TWIC) program, now being rolled out at ports nationwide, is almost certain to push thousands of drivers off the docks. TWIC is designed to limit port access by requiring anyone who works at or conducts business at a port to have a biometric identification card that includes detailed information about the holder. Only U.S. citizens are eligible for the IDs, which require a background check and fingerprinting.
So far, said Kellaway, the TWIC acceptance rate for drayage drivers is 96.7 percent. That sounds good—until you learn that an estimated 20 percent won't even apply because they know they won't pass. He and many other industry observers predict that upwards of 200,000 drivers nationwide will drop out of the business for that reason alone.
The regulatory pressures just won't let up. In California, current and proposed clean air regulations are likely to burden owner-operators and small trucking companies with so much additional cost that they may not be able to afford to stay in business. The Clean Truck Program, included in the San Pedro Bay Ports Clean Air Action Plan (CAAP), requires a phased implementation of new or retrofitted low-emission tractors by Jan. 1, 2012. Few owner-operators— or small truckers, for that matter— can afford to pay or borrow $50,000-plus for a new tractor or even $15,000 to retrofit their current vehicles. Although grants and loan programs are being developed to help defray the cost of updating an estimated 16,000 vehicles, they may not be enough to bridge the gap.
The clean air plan also requires drivers who do business at Long Beach to be either employees or contractors of port-approved trucking companies, known as "Licensed Motor Carriers" (LMCs). The Port of Los Angeles will adopt an even more restrictive policy. LA will require all drivers to be employees of approved carriers that own the tractors—no contractors allowed. Port of LA officials say their approach will ensure a more stable, more economically viable workforce with compliant vehicles. But there's a potential fly in that ointment: An economic impact analysis of the Clean Truck Program found that so many owneroperators would quit if forced to give up their independence that a significant capacity shortage could result.
To someone who often doesn't make a whole lot more than minimum wage and typically has neither health insurance nor a pension, the costs and hassles involved in hauling containers simply aren't worth it. By Kellaway's estimate, the average drayage truck generates $100,000 annually, but the driver clears just $7 an hour. The 2007 Port of Seattle survey bears that out: Respondents worked 11 hours per day to earn an average annual income of $31,340 per year, after deducting truck-related expenses. A similar survey of drivers in Southern California came up with an even lower figure. (See the sidebar titled "portrait of a drayage driver.")
Struggle for survival
Although the pressures and problems are greatest in Southern California, similar scenarios are playing out nationwide. Is there any remedy? It's difficult for even technologically sophisticated companies with strong service networks to get premium rates, so raising drivers' per-trip rates is not an option, Kellaway said. RoadLink, which formed its network by consolidating many of the larger regional intermodal companies around the country (including Kellaway's own Boston-based company), is instead trying to help drivers reduce their costs. Those initiatives include help with vehicle financing, using RoadLink's technology to reduce empty miles, and creating a buying cooperative for fuel, tires, and parts. All together, he estimates, those initiatives cut drivers' annual costs by anywhere from $2,000 to $5,000. Whether such programs will be enough to keep drivers in their cabs for the long term is uncertain.
And it's not just the drivers who are an endangered species. The small trucking companies whose employees and independent contractors serve importers and exporters also are disappearing. Most of them, Kellaway said, are "mom and pops" that have no succession plans—"their kids don't want to take over the business."
The potential loss of drayage capacity as small truckers close up shop and independent drivers park their trucks permanently is a genuine threat to international supply chains, Kellaway argued. "Intermodal drayage companies [do business with] multibillion-dollar companies, and every single one is dependent on small local drayage companies that don't have long-term prospects for survival," he said. "We've got to figure out how to correct this ... or the current business environment could force their extinction."
portrait of a drayage driver
The drivers who shuttle ocean containers to and from ports work hard for their money, as a March 2007 report on truckers serving the ports of Los Angeles and Long Beach attests. The report, prepared by CGR Management Consultants for the Gateway Cities Council of Government, includes these statistics:
The vast majority of port drayage drivers are independent owner-operators (IOOs). Some IOOs work as contractors for local trucking companies.
The average tractor operated by IOOs is a 1994 model purchased for $21,500.
The average IOO survey respondent grosses $73,900 per year. Fuel costs eat up more than one-third of that revenue—more than $25,000 on average. (Note: These figures were based on a cost of $2.87 per gallon, the price of diesel at the time the report was prepared. Diesel currently exceeds $4 per gallon.)
The average net income reported by IOOs is $29,600, a figure the researchers believe may be overstated.
IOOs worked 50.7 hours per week on average.
Port drayage drivers who are full-time employees of local trucking companies earn an average hourly rate of $16.13 and receive limited benefits.
Nearly 90 percent of the interviews with IOOs who contract with trucking firms were conducted either partially or entirely in Spanish.
To read the report, Survey of Drayage Drivers Serving the San Pedro Bay Ports, go to www.gatewaycog.org.
Another report on drayage drivers is Big Rig, Short Haul: A Study of Port Truckers in Seattle, which was based on a 2007 study conducted by the nonprofit organization Port Jobs. The report is written in a very accessible, nonacademic style. Especially interesting are the personal profiles of individual drivers and the challenges they face. The full report can be found at www.portjobs.org/bigrig_shorthaul.pdf.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.