WERC conference rallies shipper and carrier collaboration

Tom Andel, Executive Editor -- Logistics Management, 4/26/2007

NASHVILLE, Tenn.—If Jim O’Neal, president of O&S Trucking , a truckload carrier based in Springfield, Missouri, is right, logistics managers don’t have much time to make the changes necessary to prepare them for the business world of seven years from now. He predicts that by 2014 there will be 110,000 fewer truck drivers to handle a 70 percent increase in freight.

O’Neal and several other C-level transportation executives, offered their insights on the state of their art during a panel discussion held at the 30^th annual conference of the Warehousing Education and Research Council (WERC) held this week in Nashville. Joining him on the panel were Patrick Reed, executive vice president and COO of FedEx Freight, Richard Hoehn, vice president of sales/supply chain for Averitt Express, and Van Cunningham, assistant vice president of eBusiness for Burlington Northern Santa Fe railroad.

While trucking’s capacity will be stretched, rail is preparing to absorb a lot of business. Cunningham said for the past five years rail has enjoyed 11 percent annual growth. While business is beginning to soften in the building materials industry, consumers will help rail sustain seven percent annual volume growth.

To protect its business from erosion, Averitt’s Hoehn said regional trucking companies must evolve into single-source service providers so they can compete with the mega-carriers. However, shippers need to do their part as well, if they want to preserve a high level of service from these carriers. The days of adversarial relationships are over, he added. They need to collaborate on forcing inefficiencies out of their operations. That will require the ability to measure and adjust.

FedEx’s Patrick Reed agreed with Hoehn, and added that the growth in international shipping will require shipper/carrier investments in infrastructure and a mutual understanding of each other’s business. “As we grow international business, you need to be experts on documentation,” he advised WERC members.

O’Neal asserted that shippers also needed to support legislation that develops the highway infrastructure. The cost of congestion represents two percent of the nation’s gross domestic product, he said. Furthermore, equipment and drivers must be utilized more efficiently while the government needs to develop a comprehensive energy policy that includes the building of more refineries.

Cunningham concluded that as large portions of the U.S. population move to the edges of major urban areas, so will distribution centers. Rail service will need to do the same, and he urges shippers to support the "Freight Rail Infrastructure Capacity Expansion Act" (S.1125) which would establish a 25 percent investment tax credit for expenditures on new freight rail infrastructure. Eligible expenditures would include new rail track, intermodal facilities, rail yards, locomotives or other rail infrastructure expansion projects.

Shippers will have to evolve with the infrastructure, O’Neal added, and challenged his audience to revisit their own business models in preparation for a strong upsurge in economic growth. He suggested the following considerations to make better use of carriers as the driver shortage continues: 24/7 operations, better driver amenities during delays, and better contingency plans to reduce those delays.