Subscribe to our free, weekly email newsletter!


Equipment and driver expenses are moving LTL rates up, says A. Duie Pyle’s O’Kane

By Jeff Berman, Group News Editor
July 25, 2011

With the recent news of rate increases being implemented by large less-than-truckload companies come various reasons behind these increases. At the top of the list for many carriers are equipment expenses and the costs related to hiring and training drivers. LM Group News Editor Jeff Berman recently had the opportunity to chat with A. Duie Pyle President of Steve O’Kane about these factors. A transcript of the conversation is below.

LM: Now that we are seeing some recent rate increases by publicly-traded LTL players, can you shed some light on what is influencing pricing from your company’s perspective?
O’Kane: I think what is going on and entering into our decision-making now is that we are relatively at capacity and at some terminals overcapacity, but we are in a situation where we are buying tractors and trailers and hiring drivers so our cost point has shifted between variable and fixed costs pretty radically as a result. With a couple of those dynamics in buying tractors, for example, where we have 140 tractors on order that cost about 16 percent more than similar tractors did in 2006. For trailer prices, we are finding that with steel prices and tire prices, we are going to pay 25 percent-to-30 percent more but don’t have an exact comparison [to previous prices for trailers] because our spec has changed with some additional value items.

LM: What about the costs related to filling trucks with drivers?
O’Kane: The biggest driver is the cost of labor which is difficult. On a regular basis, we are running our own driver academy in which we train dock and warehouse staff to become professional truck drivers. Each driver that we produce out of that school, almost without exception, is a great employee, but it is cost of north of $20,000 per trained driver that we experience in that process. And at the same time wages have been tightening and drifting in an upward direction. We never reduced driver wages in 2008 or 2009 when many other carriers did. We granted an increase in 2010 and again this month. There is going to be continual pressure on driver wages, because during the deepest of the recession, the labor pool left the LTL sector and our sense is there are a lot of people that don’t care to come back into it so our sense is that wages will continue to play a very big role going forward, with driver wages putting continued pressure on rates going forward.

LM: What are some of the related impacts of that trend?
O’Kane: Some of the truckload guys are kind of curtailing capacity, because they are chasing drivers. We at least have the opportunity of providing preferable employment in many ways for many of their drivers, with things like regularly-scheduled on-home time.

LM: Is another benefit of this on the LTL side the ability to more easily flex up or down your network as demand indicates?
O’Kane: Yes. Drivers are the limiting factor right now. It used to be that we would talk about terminal doors being the limiting factor. Going forward, the limiting factor, when it comes to rates, is going to be the ability to recruit or develop and retain quality drivers.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Following the lead of its Congressional Colleagues in the House of Representatives, the United States Senate yesterday approved a measure geared to keep federal surface transportation funding intact through the end of December with a nearly $11 billion stopgap fix.

XPO Logistics announced second quarter earnings and the acquisition of two companies, New Breed Logistics, a non asset-based 3PL focusing in contract logistics services, for roughly $615 million, and Atlantic Central Logistics, a 3PL provider of last-mile logistics services, for roughly $36.5 million.

The report, entitled “Outlook for the Domestic Transport and Logistics Market in 2H14 and Beyond,” takes the view that strong freight levels in the second quarter have left trucking companies in a good position: one in which they need to come up with new plans to handle rising demand. But even with that positive momentum afloat, the report observes that there are some familiar challenges intact, such as a lack of qualified drivers and the regulatory drag from the new hours-of-service rules that took effect in July 2013.

Flags of Convenience are a fact of life in the commercial maritime trade, but several European political action groups are worried that they will pose a threat to the Continent’s air cargo industry.

For May, which is the most recent month for which data is available, the SCI is -7.5, following April’s -7.5. FTR said this reading represents a still-tight capacity environment, as utilization rates hover between 98 percent and 99 percent.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA