World Trade - November 2008 - (Page 40)

SUPPLY CHAIN Trucking Survey Highlights Industry’s Top Concerns A newly released survey from the American Transportation Research Institute (ATRI), entitled “Critical Issues in the Trucking Industry—2008,” highlights some of the top concerns facing industry executives. Not surprisingly, this year’s top two issues are fuel costs and the economy. According to the ATRI, fuel costs once again attained the top ranking in the survey, now in its fourth year. “Though motor carriers in 2008 aggressively sought to recoup fuel cost increases with fuel surcharges, the industry simply could not keep pace with the unprecedented rise in diesel fuel costs, topping $4.70 a gallon in July 2008. Fuel cost increases were directly related to equally unprecedented increases in oil prices; increasing from $90 a barrel in October 2007 to $147.27 in July 2008. Other oil- and fuel-related issues impacting the industry include increases in tire and motor oil costs. A secondary impact was the Federal Reserve Bank’s response to higher energy costs (multiple increases in the prime interest rate), which reduced the industry’s access to loans and capital. The year 2008 was also signiﬁcant in that fuel replaced labor costs as the top operating expense for most carriers.” The ATRI’s proposed strategies for dealing with higher fuel costs include: Advocate for increased supply through expansion of domestic drilling and reﬁnery capacity. Alarmingly high fuel prices spurred the trucking industry, as well as many others in the nation, to express a strong sentiment to increase domestic oil and fuel supplies. As Fuel Costs rose, carriers were impacted two-fold with higher operating costs and increases in other areas of their business. Sixty-eight percent of respondents ranked this strategy ﬁrst. Promote initiatives to conserve fuel including a national speed limit and tax incentives for fuel-saving technologies. In 2008, many motor carriers attempted and succeeded in reducing fuel consumption by reducing top vehicle speeds through the use of speed governors. Respondents indicate the need for a broader Top Trucking Issues 2008 Fuel costs Economy Driver shortage/Retention Govt. regulation Hours-of-Service Congestion Tolls/Highway funding Environmental issues Tort reform Onboard truck technology Source: ATRI, www.atri-online.org approach to conserve fuel. At the same time, many in the industry are wary of the potential safety impacts of policies that increase the differential between maximum truck and automobile speeds. The industry supports tax incentives to increase industry adoption of proven fuel-saving technology. Twenty-one percent ranked this strategy ﬁrst. Support increased design and deployment of alternative energy forms. The alternative energy market continues its dramatic expansion as industry, government, and consumers grapple with high fuel costs and increasingly stringent emission requirements. Despite the operational challenges associated with expanded use of alternative energy/fuel, the industry continues to support their increased use. Thirteen percent of respondents ranked this strategy ﬁrst. The economy debuts on the list as the second most pressing issue facing the industry, according to the ATRI. “As high fuel prices, a deepening credit crisis and rising inﬂationary pressures take a greater toll on the U.S. economy, the industry is pressed by increasing regulations, slumping demand, excess capacity, and increases in both ﬁxed and marginal key cost centers. These factors result in a ﬁercely competitive environment where revenues decline or remain ﬂat while regulatory compliance and operating costs continue to rise.” The ATRI’s proposed strategies for dealing with the economy include: Support pro-freight candidates in state and federal elections. The top strategy for mitigating the impacts of a slumping economy on the industry is to proactively support those candidates that understand the importance of trucking to the nation’s economy. Pro-freight candidates are more likely to have an understanding of the complexities of trucking and the burdens placed on the industry by economic externalities and excessive regulation. Lastly, pro-freight candidates are more likely to help industry educate fellow decision-makers. Forty-ﬁve percent of respondents ranked this strategy ﬁrst. Advocate for policies that control healthcare costs for employers. Narrowly missing the top strategy ranking was policies for controlling healthcare costs. As the industry’s already thin proﬁt margins are squeezed further by economic conditions, the industry must focus on containing both ﬁxed and operating costs, especially those that increasingly reduce profitability. As healthcare cost increases continue to outpace the overall inﬂation rate, the industry must advocate for public policies that keep these expenses in check. Pursue full implementation of trade agreements (NAFTA, etc.). The two-year NAFTA pilot program, a precursor to full implementation of the trade agreement, remains a hotly debated topic. The U.S. House of Representatives recently passed a bill to end the pilot program. The bill awaits action by the U.S. Senate. Additionally, a lawsuit ﬁled in federal court spearheaded by the Teamsters and other challenging the legality of the program remains pending. Respondents indicate that opening new markets for U.S. motor carriers via NAFTA is a key to the growth and health of the industry as well as the U.S. economy. Ten percent of respondents ranked this strategy ﬁrst. and Roadway long-haul LTL units into one operating network with combined sales forces and an integrated product portfolio. “Given the positive customer response from our recent combination of the corporate sales teams and the increasingly dynamic operating environment, we believe now is the right time to take such signiﬁcant action,” stated Bill Zollars, Chairman, President and CEO of YRC Worldwide. “The economic downturn has created the capacity in our networks needed to effectively inte40 WORLD TRADE NOVEMBER 2008 grate our operations, while improving service reliability and speed. By offering a comprehensive service portfolio through one uniﬁed network, we can more effectively serve our customers and simplify their experience.” The move will help take excess capacity out of the market, says Jindel, which would help improve the overall picture. Capacity reduction is also occurring through the dwindling of competitors in the marketplace, and a number of companies have already called it quits this year. http://www.atri-online.org

Table of Contents Feed for the Digital Edition of World Trade - November 2008

World Trade - November 2008 Contents Unexpected Responses to Unanticipated Change Reading the States of Risk in Today’s Global Economy Supply Chain Watch Tradewinds Failed Promise: Mexico and NAFTA, 15 Years Later The Short Tale Marrying Trade Finance and Transportation into a Single Transaction Trucking Gets a Double Whammy Are We Safe Yet? Logistics Resurrects the Rust Belt Keep on Compressing

World Trade - November 2008

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