Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
When a Utah farmer named Chester Robert England decided soon after World War I that there had to be a better way to make a living, he bought a Model T truck and started hauling milk in the morning for a local dairy, then produce in the afternoon from farms to market.
Over the decades, England's two sons, their two sons, and then their six sons, joined the family business. After 91 years, Salt Lake City-based C.R. England Inc. has become one of the most established and successful refrigerated truckers in the land.
Yet Dean England, president of the privately held company and one of the third generation of Englands to work in the business, is under no illusions of how his grandfather would have fared if he began in 2011.
"Could he do it today?" England asks rhetorically. Then he answers: "I don't know. It might not work." England has three sons employed at the company.
Nearly 15 years after C.R. England got started, Earl Sr. and Lillian Congdon founded a Virginia trucking company with a lone rig hauling goods between Richmond and Norfolk. After Earl Sr. died in 1950, Lillian Congdon took over the company, joined by their two sons. In 1998, David S. Congdon, grandson of the founders, became president. He would eventually add the CEO title. His father, Earl, remains executive chairman of the board.
Today, less-than-truckload (LTL) carrier Old Dominion Freight Line Inc. is arguably the country's most successful trucking company and is completing one of the best years in its 77-year history. Yet as he surveys the landscape, David Congdon acknowledges how hard it would be for a new entrant to even begin replicating Old Dominion's network of 216 service centers in the lower 48 states.
"It would be relatively impossible today to start up an LTL company and build a network like we have," he says. "It takes a lot of time and capital."
Congdon is somewhat pessimistic about the future for the next generation of truckers. "I'm not sure I would encourage my children to start a trucking business," says Congdon, who nonetheless has two sons-in-law, a niece, and two nephews working for Thomasville, N.C.-based Old Dominion.
Ready to hang it up
The thousands of truckers that work the nation's roads each day likely share the sentiments of England and Congdon. Truckers today face a witch's brew of challenges: escalating asset inflation, higher insurance premiums, a looming driver shortage, increasing government regulations, volatile diesel fuel prices that as of mid-November had hit $4 a gallon, and difficulties gaining access to credit. Freight rates, though rising, are for many carriers just covering these higher costs. Faced with poor prospects for profitability, truckers are fleeing the market, and a generation of potential entrepreneurs is being deterred from entering an industry that has historically thrived on entrepreneurial activity.
A third-quarter 2011 survey by mergers and acquisitions advisory firm Transport Capital Partners (TCP) found that 11.8 percent of fleets would consider leaving the industry in the next six months if volumes don't increase. About 20 percent of smaller fleets—those with annual revenues of less than $25 million—would also consider exiting if business fails to improve during that time frame, according to the survey.
In addition, 28 percent of truckers surveyed are considering selling out in the next 18 months if conditions don't improve, the survey found. That's the highest total percentage since the survey began almost three years ago. Nearly 40 percent of smaller carriers are weighing an exit, compared with 23 percent of the larger carriers, TCP said.
Ben Gordon, managing director of BG Strategic Advisors, a Palm Beach, Fla.-based company specializing in logistics mergers and acquisitions, says his firm is working overtime in large part fielding inquiries from trucking companies interested in exploring a potential sale. As a result, "we expect to double our deal activity in 2012," he says.
"It just isn't fun anymore"
Ironically, smaller truckers are more optimistic than their larger brethren—and by a wide margin—about gains in freight volumes. Lana R. Batts, a long-time trucking executive and now a partner at TCP, says smaller carriers are more frustrated with higher costs and bureaucratic red tape than they are heartened by a rebound in freight demand. "In essence, it just isn't any fun anymore," she said in a statement.
Many trucking executives started their companies in the 1980s in the wake of trucking deregulation and have no interest in "relearning" the business at this point in their lives, Batts said in an e-mail to DC Velocity. Their children have no desire to inherit a business where the risks have become so high and the potential returns so small, she added.
If these trends play out, they will have implications that go beyond a particular bloodline, Batts warned. "The desire to leave ... will significantly change the face of the industry as well as the business models that depend upon smaller carriers providing hard assets," she said. It is estimated that 93 percent of all U.S. truck fleets operate seven trucks or less, with many of those being one-person, one-rig owner operators that drive under contract for larger fleets.
High-cost wheels
Todd Spencer, executive vice president of the Owner-Operators Independent Drivers Association, says the number of independents leaving the business is growing at "greater numbers than we've seen in the past." The association did not have data to quantify that claim.
For independents as well as for larger fleets, the biggest hit is the cost of the rig itself. Since 2001, the cost of a Class 8 tractor has risen to $124,000 from $84,000, according to data from investment firm BB&T Capital Markets. In addition, late-model used trucks—rigs built between 2007 and 2010—are in short supply. Today, there are between 350,000 and 400,000 fewer late-model used trucks available than at nearly any time in the past 15 years, the firm said.
The escalating cost of new trucks and the shortage of less-expensive rigs are putting severe pressure on independents that lack the economies of scale of larger, multi-unit fleets. In the past, about half of all owner-operators would buy new trucks as part of a typical business cycle, Spencer says. Today, that number has dwindled to about one-quarter, he adds.
Spencer acknowledges that today's rigs are better built, with longer life spans that don't require as much turnover as in the past. However, he says most of the decline is attributed to the rising tab for new trucks, which is making it harder for independents to swallow. Complying with federal engine emissions standards mandated by the Environmental Protection Agency alone contributes about $10,000 to the cost of a new truck, he says.
Environmental compliance costs are just one of several government mandates that have hit truckers' pocketbooks. Others include CSA 2010, the new driver safety grading initiative; potential changes to drivers' hours-of-service regulations that could force truckers to add more rigs and drivers to their fleets; and requirements for drivers to install electronic recorders in each vehicle to monitor drivers' compliance with hours-of-service requirements. The latter two initiatives are, or have been, subject to legal challenges by the industry.
"So much of the risk right now is coming from government regulations making life miserable for our business," says England.
No going back
Compounding the industry's angst are the accompanying costs of state regulations, as well as the proliferation of class-action lawsuits brought by plaintiffs' attorneys seeking heavy monetary damages in the wake of truck-related accidents. England says his company faces major liability issues in California, where its footprint is "two to three times larger" than in any other state.
England is confident that his company will work through the treacherous road ahead. But his optimism is leavened by the knowledge that the industry will never again be what it once was.
"We are going to find ways to be successful, no matter what," he says. "But is it going to be as much fun as it used to be? Probably not."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.