Archive for December, 2015

2016-The State of the Freight

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Gosh, what a change a year brings.  We started 2015 coming off one of the craziest trucking years for freight in the history of trucking.  In 2014, a combination of weather, strikes at western ports and a supply/demand balance that finally shifted to the carriers, allowed ACT and many carriers to raise rates significantly for the first time in a long time.  We were busier than I have ever seen and we simply couldn’t cover all the loads.  The timing couldn’t have been better because this coincided with the most severe shortage of good drivers in the history of trucking.  Raises to customer means we can raise drivers which we did…several times.  The way this works is we get the increases from customer, then we increase driver pay. In many ways this was a perfect storm for ACT and its drivers.

2015 was much different.  Although our numbers show that we delivered a similar number of loads as 2014, the freight seemed softer.  Throughout the trucking industry, carriers, economists and industry analysts talked about how it was softer.   Yet, the memories (and lessons) of 2014 were still fresh in the customer’s minds and again we were able to increase rates and driver pay.  As we conclude 2015, we know that customer’s inventories are bloated and normally this is bad for truckers until this is worked off.  Yet, we had some record weeks leading into Christmas.  Now some customers are feeling like they can get rate reductions.

So what is going on?  If we could all predict that we would make a fortune.  But there are some things I can say with confidence.  For one, I know that when it is slow here at ACT it is slow everywhere.  How do I know that?  Because we have extensive contacts throughout the trucking industry and are in touch with those folks on a regular basis.  We have Wall Street analysts call us on a regular basis to find out what is going on.  At the same time we pick their brains for what they know and what they hear from other carriers and shippers.  We keep current with all the industry and economic publications.  So we are plugged in…at least as much as you can be.  What we have seen throughout the years is that whatever we are feeling is usually what others are feeling.  I will say that others have been feeling slow.  Fortunately at ACT, although things are slower than 2014, it seems that we are doing a little better than most companies.

We are also tuned in to the seasonal aspects of trucking. We know that January and February are usually bad months.  We do have a lot of winter friendly freight.  Batteries and insulation do well during the winter.  By March our three home improvement store retailers are usually gearing up nicely.

It is important that drivers understand the state of the freight.  In the past, I have often seen what I call the “Spring Migration.”  We see our turnover go up and our recruiting go up.  What is going on?  Well, after it has been slow for a while drivers start leaving….not just here but everywhere.  So as our trucks empty of drivers who know ACT, they fill with drivers who don’t.  This really adds punishment to the pain for drivers who job jump when it gets slow.  The freight conditions are similar at the carrier they leave to go to as it is for the carrier they leave.  The go from a system they know to one they don’t.  And they waste a week in orientation.  All this costs that driver money.  And it doesn’t change their problem, which is that they did not store their nuts for the winter.

What can we expect for the first quarter of 2016?  We know that customer’s inventories are too high.  When this happens, they quit building things until their inventory is lower.  This hurts manufacturing.  All manufacturing indexes are down to their lowest levels in years.  What is the solution?  Eventually their inventory sells out and they must start building and shipping again.  We have a strong Dollar.  This hurts manufacturing because many customers sell their products overseas.  When the Dollar is strong their price is higher.  Thus fewer people buy their products and fewer are made.

One highlight in the economy is the price of fuel.  This is one of those things that helps some and hurts others.  If you work in the oil industry you are probably hurt and laid off.  If you don’t you have seen your disposable income rise as you spend less of fuel.  70% of the economy is consumer spending so anytime consumers have more money that is a good thing.

Automotive and housing are great right now.  Good for us as we are involved in automotive and insulation other items such as flooring and appliances.

So all in all it is mixed bag.  We are adding salesmen to make sure we are out finding the best freight 52 weeks a year.  We know the winter is slow for everyone.

At some point electronic logs will become a big deal and reduce capacity.  That leaves more freight for us.

All in all, I think 2016 will have decent freight….not like 2014, but pretty good.

Happy New Year and Happy and Safe Trucking!

Tom

The Last Cowboy

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This is the last cowboy song:
The end of a hundred year waltz.
The voices sound sad as they’re singin’ along.
Another piece of America’s lost.  The Highwaymen

 

SLEEPING DRIVER

The Federal Motor Carrier Safety Administration on Dec. 10 announced its long-awaited final rule requiring that interstate drivers use electronic recording devices intended to enforce hours of service regulations, and reduce driver fatigue and paperwork for motor carriers and drivers.  “Since 1938, complex, on-duty/off-duty logs for truck and bus drivers were made with pencil and paper, virtually impossible to verify,” said Transportation Secretary Anthony Foxx. “This automated technology not only brings logging records into the modern age, it also allows roadside safetyinspectors to unmask violations of federal law that put lives at risk.”

In preparation for this announcement the FMCSA required some changes in how our electronic logging devices (ELDs) work, which I’m sure you have noticed.  To save yourself trouble learning these changes, be sure to plan your time carefully and follow these tips:

Turning your truck ignition to “off” will help protect your duty status.
Do NOT log out of the system to circumvent the system.
Do NOT use off duty driving to circumvent the system.
Be proactive on managing your duty status in the system.
The criteria for personal conveyance has not changed.
As always, if you have issues or specific questions, you can contact our Safety team for further assistance.

One of the most important core values at ACT is that of “integrity.”  Integrity means doing the right things always, even if nobody is looking, even if nobody will ever know.  We have a long history of being proactive on safety and compliance and a long earned reputation of being “by the book.”  We were an early adopter of ELDs.  When I say we are “by the book,” it is more than lip service.  We are “by the book,” no kidding, no excuses, no exceptions.  We may not like all the laws and regulations we operate under, but we follow them.

There are many benefits to this culture.  We sleep well at night.  We know that of all the problems we can have in trucking, violating the law is not one of them.  We fear no audit, whether that by the DOT, the IRS or any other agency.  We know we are legal so they can come in and look at anything they want.  It makes drivers more miles.  We don’t run backroads to avoid scales.  We don’t spend a lot of time in the chicken coops.  Our CSA scores are low and most of the time an ACT driver will get a green light at the scales.  How much time and how many miles does that save?  A lot.

We deployed ELDs a long time ago and our drivers learned how to use them.  There is a learning curve.  At first a driver may lose miles.  But they soon learn that with good time management and planning a driver in a company with a “by the book” culture can get as many or more miles on ELD’s.  Many of our drivers like the convenience and say they would never go back to paper.

ACT’s rates to customers and our pay to drivers are set so that the company and the driver can make good money running legally.  This is a big advantage going forward as the entire industry adapts to ELD’s.  All the good carriers now use ELDs.  But there are many cowboy trucker or “sport truckers” who don’t.  Why don’t they?  For many it is because they run illegally.  When we bid against these outlaws, they are the ones who put in cheap, below cost, rates.  Why?  Because they make it up on illegal miles.  These are also the companies who pay drivers cheap and coerce them into running illegally.

Recently the FMCSA published a rule prohibiting coercing a shipper, broker, carrier or receiver from coercing a driver into running illegally.  For us, this is a big “duh!” but for many this is a big threat of large fines.  No longer can a shipper or carrier put everything that goes wrong on the back of the driver.  We applaud the regulation.

BOOTS

Running cowboy is about to end.  It is often the outlaw competition who put in cheap rates.  Well, no more.  Our rates determine how much we can pay drivers and we always want to pay more.  The cowboy’s world is about to change and this will be to our competitive advantage.  They will be forced to do things legally.  Their costs will rise.  They too, will now have the cost of doing things right.  No longer can they cut corners at the expense of the driver.  They will have to get their rates up not only to make a profit, but to keep their drivers.  Their drivers are not paid enough to run “by the book.”  The business model of these outlaws will change dramatically.  Many will not be able to adjust quickly enough to stay in business.  Those that make the adjustment will have to price their services and pay their drivers responsibly.  We think this is a good thing.  Shipper and receivers who waste a driver’s time and expect him to just deal with it are in for heavy changes too.  As everyone goes to ELD’s the focus will be on driver’s precious time.  They will have to change how they do things.  Our long time investment in integrity is about to pay off.

Happy and Legal Trucking!

Tom