The image is embedded in the American psyche: The independent trucker, master of his (or her) own fate on the open road, ready for adventure. But for many truckload (TL) drivers and companies, the only adventure these days lies in keeping their rigs moving and making a modest profit.

Despite the image of independence, the truckload market has always been a tough, competitive business. In the two decades since Congress began dismantling trucking regulation, a few for-hire truckload carriers have grown into large and successful businesses, but none has gained anything close to a dominant market position. A variety of factors have made the current market particularly difficult for the carriers. For shippers, those market conditions represent a mixed blessing: Rates are good, but finding reliable service providers, particularly on the spot market, can be a major headache.

Truckload operators are overwhelmingly small businesses. More than two-thirds of the 100,000 to 200,000 TL carriers in the United States (including owner-operators) operate fewer than six trucks. Getting into the business is easy. Succeeding in it is not. The carriers face a variety of challenges.

For one thing, TL carriers are much more vulnerable to fuel cost volatility than their less-than-truckload counterparts are. Fuel accounts for about 12 percent of a TL company's costs, compared with 6 percent for LTLs. As a result, last year's 30-percent fuel-price runup was particularly tough on smaller TL companies, which have little marketplace leverage to impose fuel surcharges on reluctant shippers.

The high fuel prices created a business crisis for thousands of truckload operators and led to two demonstrations by carriers on Capitol Hill last year. The 59,000-member Owner-Operator Independent Drivers Association (OOIDA), which represents the independent truckers (who are especially vulnerable to steep fuel-cost increases), has been lobbying Congress to create a uniform, national method for assessing fuel surcharges for all segments of the motor carrier industry. The Truckload Carriers Association, which represents nearly 900 private fleets, supports the proposal.

Shippers and brokers oppose the effort, which garnered enough support to pass the U.S. House of Representatives in the last congressional session before dying in the Senate. The OOIDA has indicated it will revive its efforts to put in place a mandatory fuel-surcharge mechanism this year.

Along with the high cost of diesel, another factor dragging on the TL sector is driver retention and recruitment. Keeping good drivers is a perennial problem for truckload carriers. It is particularly difficult in the longhaul sector where drivers must spend longer periods away from home. Carriers have used a variety of strategies to attract and keep drivers. Some companies are offering higher pay and expensive perks, such as company-paid airfare back home for truckers whose schedules have kept them away for too long. Others have invested heavily in well-equipped sleeper tractors, the drivers' home away from home.

Still, the industry is expected to need 80,000 new drivers a year to replace those who are leaving. If the U.S. Department of Transportation's controversial proposal to restrict drivers' hours of service succeeds, that will fuel demand for thousands more drivers and cost the trucking industry $19 billion to implement, according to the American Trucking Associations. Robert Rothstein, general counsel for the Truckload Carriers Association (TCA) and a former trucker himself, says studies have shown it costs $4,000 to $5,000 to recruit and train a single driver.

To attack the driver shortage, some industry executives are lobbying the U.S. Department of Labor to reclassify trucking as a skilled occupation. That would allow carriers to hire drivers from abroad who hold U.S. visas. They're also recruiting drivers among groups previously overlooked—women, welfare recipients who are entering the workforce, and under-21 recruits who are paired with experienced drivers.

Another factor weighing the industry down is the drastic fall in the value of used equipment. A frenzy of Class 8 truck buying during the last few years has had an unintended side effect: Used equipment has glutted the market and caused prices to plummet, reducing the overall value of many small to medium-sized TL companies.

One consequence is that those companies are finding it harder to qualify for business loans, says Robert Costello, chief economist for the American Trucking Associations. The drop in value for used equipment may prompt some carriers to hold onto their trucks longer, but Costello says that won't work for longhaul carriers. "They really need reliable equipment," he says. "They can't afford to break down on the road because, to them, time is money."

Adding to TL carriers' woes are the delays in pickups and deliveries caused by ever-increasing traffic congestion on the nation's highways. As John Siebert, project manager for the OOIDA Foundation Inc., told the Department of Transportation's Transportation Research Board at its January annual meeting in Washington, D.C., traffic delays are particularly costly to owner-operators.

"Owner-operators are paid under a variety of schemes—by trip, by mile, by a percentage of the linehaul charge, but rarely, if ever, by the hour. This means that an owner-operator is maximizing his earning potential only if his truck is averaging 60 miles per hour," Siebert told the panel. "If he gets caught in rush-hour traffic, a construction zone, or six lanes reduced to one because of an accident, he can watch his 82 cents-per-mile subsistence pay dwindle to 60 cents, 40 cents, 20 cents, and even stop entirely."

To reduce congestion's impact on their bottom line, truckers try to do most of their driving at night when traffic is at a minimum. But that tactic works only if shippers are flexible about delivery times, which they rarely are, Siebert said at the meeting. Drivers also use rest areas to avoid congestion, he said, arriving within 50 miles of their destination and parking for the rest of the night, then delivering before the morning rush-hour begins. "In a recent OOIDA rest-area survey, we found that 75 percent of the truckers used rest areas to avoid congestion or to stage deliveries for a better time of the day at least once a week," he said. Some carriers are refusing assignments in the crowded Northeast and some are adding a "congestion fee" to each load going to New York City and Long Island, he added.

And then there's the slowing economy. A study by the U.S. Federal Reserve reveals that trucking companies are encountering a slowdown in business activity at the same time that their costs are rising. The Fed's "Beige Book" report released in January, which surveyed economic trends in the 12 Fed regions across the United States, said that nearly all the trucking companies surveyed in the Cleveland region reported that business in December dropped in comparison with business in December 1999. Other regions also reported a drop in demand for transportation services, according to the "Beige Book" report.

Costello says he doesn't expect a full-blown recession but admits that times are tough for TL carriers. "Some of the players in this industry are going to be hit and hit hard," he says.

Experience is bearing out his prediction. In January, Intrenet Inc. of Milford, Ohio, one of the largest flatbed TL companies in North America, announced that it and its four wholly owned subsidiary trucking companies would cease operations. The company laid off 1,700 employees in the closing, which also affected the 1,100 owner-operators doing business with Intrenet. When announcing the shutdown, the company cited a lack of capital to execute its business plan. In a prepared statement, Intrenet said, "After a careful and thorough review of the company's business, industry dynamics, and all available options, it was determined that issues related to fuel prices, driver retention, and the unwillingness of many customers to accept higher rates would preclude the company from achieving operational profitability in the foreseeable future."

As the economy continues to slow (see "Heading for a downturn," Logistics Management & Distribution Report , January 2001) and the demand for freight drops, motor carriers' costs are expected to swing upward. Rate increases—if shippers accept them—may offset some of those costs but will not be enough to preserve earnings for many carriers. So TL companies are searching for ways to reduce costs.

Last year, six of the largest truckload carriers merged their 3PL divisions into one Internet-based company, Transplace.com. TL carriers Swift Transportation, Covenant Transport, J.B. Hunt, M.S. Carriers (in the process of being purchased by Swift), U.S. Xpress Enterprises, and Werner Enterprises formed the online freight exchange, estimated to generate about $700 million in revenue. Transplace, which invites other carriers to take part, also intends to use the combined purchasing power of the carriers to create leverage with their suppliers.

Carriers also are working to convince customers to make some changes in their operations, says the TCA's Rothstein. If shippers can eliminate delays at their loading docks and build more flexibility into delivery times, he says, that will increase TL profitability and make carriers more productive.

To address this problem, the TCA commissioned a study, "Just in Time to Wait: An Examination of Best Practices for Streamlining Loading/Unloading Functions." Conducted by Mercer Management Consulting Inc., the study interviewed 27 shippers and receivers, plus a number of drivers, about problems frequently encountered on the loading dock. Among the study's findings are the following suggestions for carriers:

• Manage customers more aggressively, walking away from "no-win" freight; and work with shippers and receivers to identify and address problems.
• Unbundle the cost of delivery to reveal problem areas and show where incentives or penalties could improve efficiency and reduce delays.
• Outsource selected activities or entire spotting and unloading functions.
• Negotiate contract terms more effectively to induce changes in shipper/receiver behavior and motivate practices that reduce delays. "Off-the-shelf" contracts can be tailored for individual situations and should clearly allocate responsibilities (e.g., unloading) and specify penalties and incentives based on specific measures or results (e.g., specified turnaround times). Higher-level management should be responsible for developing and reviewing detailed contracts.

Other carriers are focusing on the treatment drivers receive on the job, in hopes of raising driver-retention rates and thereby reducing costs. "What drives [truck operators] out of the industry faster than anything is the attitudes of people they come up against in doing the job," says Rothstein. "We think that if drivers are treated better, they won't hate their jobs."

In an effort to improve the way drivers are treated, the TCA and the National Industrial Transportation League last year adopted a "Voluntary Guide to Good Business Relations for Shippers, Receivers, Carriers, and Drivers." The guide's 50 principles urge all parties to show courtesy, follow safe practices, and engage in honest and fair dealings with one another.

Despite shippers' and carriers' best efforts, it appears that some TL truckers will be closing their doors in the coming months. But that may not be all bad for the business in the long run. ATA's Costello says the shakeout in the TL sector, while painful, may result in a stronger industry. "Those that are left are going to be generally better off than before," he says. "They'll be able to negotiate better prices and have less competition." A closer relationship between TL carriers and their customers during this painful period, he notes, may end up benefiting both.