LTLs facing growing threat of labor shortages, increased regulation that could hasten consolidation
The trucking industry faces a dual threat of a looming people shortage and a surfeit of regulations that affect profitability and will result in continued consolidation in the industry, according to Steve O’Kane, president of A. Duie Pyle.
in the NewsState of Logistics 2016: Pursue mutual benefit Loftware partners with PTC for new medical device labeling solution USC partners with U.S. Department of Commerce on the digital supply chain Case Study: New Transportation Procurement Approach Lowers Costs, Improves Service Heico Companies acquires Ancra Systems automatic truck loading and unloading systems More News
LTLs facing growing threat of labor shortages, increased regulation that could hasten consolidation among cash-starved carriers
The trucking industry faces a dual threat of a looming people shortage and a surfeit of regulations that affect profitability and will result in continued consolidation in the industry.
“Consolidation is probably not over,” said Steve O’Kane, president of A. Duie Pyle, a major $250 million-a year Northeast regional LTL carrier, at the 26th annual meeting of the North American Transportation Employee Relations Association (NATERA).
“It’s a very difficult business,” O’Kane said of the capital- and labor-intensive LTL industry. “I often wonder why anybody gets into a business.”
Rates that are largely unchanged in the past five years is creating a trucking environment in which profits are measured in cents on the dollars. Because of that slim profit margin, O’Kane said there are some LTL carriers operating on the financial fringe.
“It means the fit will survive and the unfit will not,” O’Kane predicted. “There are a lot of carriers on the fringe that will have to fall out.”
A 40-year industry veteran and former head of Teamsters-covered carrier New Penn (before its acquisition by YRC Worldwide) and other unionized carriers, O’Kane quipped he is not a trucking expert but “is an expert at making money at A. Duie Pyle.”
O’Kane got his start in trucking while in college at Tufts University and was working as a “casual” (part-time) dock worker at now-defunct St. Johnsbury Trucking Co. He earned what he called great wages for part-time work—enough for beer and book money while earning his degree from Tufts.
“I got to thinking what a crazy industry this is and said to myself, ‘I don’t know what I’m going to do after I graduate but it isn’t going to be trucking,’” O’Kane said. “Now, 39 years later, I’m still in trucking.”
Pyle, an 88-year-old company with 2,200 employees, was decertified from the Teamsters in 1979 and is union-free today. O’Kane has been president since 2006. It operates out of 18 terminals and operates seven warehouses covering 2.7 million square feet. It also operates a truckload unit with owner-operators.
“Technology has become an increasing factor in our industry on two fronts,” O’Kane said. “One is to support outstanding customer interface and the other is an enabler to create efficiencies in what traditionally is a very low-margin business.”
O’Kane said he is “not adverse” to an increase in the federal tax on diesel fuel—currently 23.4 cents a gallon, unchanged since 1993—if those revenues were dedicated toward solely improving surface transportation infrastructure.
The biggest issue affecting the trucking industry is a shortage of drivers, which could hit 500,000 as early as next year. “There’s not a lot of new entrants coming into our business and we have an aging workforce,” O’Kane said.
O’Kane said Pyle is relatively healthy when it comes to obtaining drivers. That’s because 90 percent of Pyle drivers are home every night because of its regional footprint.
“We have the best jobs in the industry,” Pyle said. “We are an attractive employer. Because of that we relatively insulated from what could be a growing (driver shortage) crisis.”
O’Kane said the government’s crackdown on safety through its Compliance, Safety and Accountability (CSA) initiative is worthwhile, the majority of carriers do not have a CSA score—which is unfair for those carriers that do have one.
O’Kane said trucking’s flirtation with natural gas as an alternative fuels has some obstacles—not the least of which is the additional $40,000 to $70,000 cost of a truck outfitted to run with liquefied or compressed natural gas.
“We like to be on the leading edge,” he said. “But this appears to be on the bleeding edge.”
Pyle, the nation’s 23rd-largest carrier, said the best way to stay union free is through employee engagement. “That’s really the only competitive advantage we have,” O’Kane said.
“There are 100 ways a driver that he can beat you out of nickels and dimes where success is defined by nickels and dimes,” O’Kane said. “Unless you have a discretionary work force that can give you extraordinary effort every day, it’s tough to make money. We’re not anti-union; we’re pro-employee.”
O’Kane said he gives his 2,200 employees one piece of advice when they are hired at Pyle.
“If you treat customers and your fellow team members as you want to be treated, you’ll be successful in this company,” he said.
“Companies that can recruit, training, retain and maintain a dutifully engaged workforce will continue to succeed,” O’Kane said. “The companies that have drivers will continue to win.”
O’Kane said his door is open to drivers’ complaints and gets a couple calls every night from irate drivers who feel they have not received a good enough route or is driving a vehicle he doesn’t like.
“We get all kinds of calls,” he said. “I read every answer to every employee survey we take.”
About the AuthorJohn D. Schulz John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. John is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis.
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!
European Logistics Update: Post-Brexit U.K. moving ahead, but in which direction? Badcock Home Furniture &more: Out with paper, in with Cloud TMS View More From this Issue