Logistics Management

Dave Schneider

A Herd of Cats…
March 30, 2008

The first wind of the "strike" came in a phone call to a friend in Southwest Missouri. I had heard about the flooding in along the Mississippi. My friend owns a several hundred acres in the Ozarks and heavy rain tends to make things kind of messy. My friend was not worried about flooding; he was more concerned about the truckers and the cost of getting livestock to market. The way fuel was going up the truckers were hiking up the rate to get cattle to market. My friend was just as concerned about the fuel costs, his tractors burn diesel. He mentioned that the last driver picking up stock for market talked about a shutdown on April Fools Day.

I was on vacation this week in Florida with my family. When I travel in other parts of the country away from home I look at all sorts of things to see what shape the local economy is in. I notice things like for sale or land lease signs on open ground. I look at for lease signs on warehouse buildings. I look at for lease signs on commercial space, offices and retail space. I look at the trucks on the road and look at who the company is and what they are hauling.

And I look at fuel prices. Driving down I-75 outside of Tampa I saw where highway diesel was over the $4 mark, and made a quick note to look research the DOE tables when I got home. I did the quick “penny a nickel” calculation for fuel surcharge off of a $1 peg and arrived at 60 cents a mile for fuel. Wow, that drives a long haul average $1.50 per mile up over $2.10 per mile. Long haul total cost per mile is now in short haul rate territory. A 200 mile haul pulls $120 in FSC.

Then on Wednesday I got a phone call from Jeff Berman at Logistics Management Magazine. Jeff wanted to know what I knew about the rumor about the O/O “strike”. Jeff was working on a rumor that he had picked up and wanted to know what I had heard. I told him that this was the second mention of the shutdown I had heard in 3 days. As my kids ran around the playground I talked to Jeff about how this is not a minor issue. The major truckload carriers use Owner / Operators to fill in for their fleets, as much as 15% of the loads being moved by the O/O’s. Turn to the brokers and the percentage is more in the 50% - 60% range. My comment to Jeff was IF the O/O’s were really organized, a shutdown over more than a day or two would cause some commotion and would not be a minor issue if sustained.

I did not think of the issue again until Friday on the shuttle over to the airport. In the seats behind us a woman was commenting to her friend about the extra bag and overweight bag charges that the airlines have started to charge to recover fuel costs. Then she told her friend that the truckers were going on strike over fuel costs. Short on details and understanding, she and her friend were mildly concerned about what would happen if all of the truckers went on strike.

It was at this point I realized that the mainstream media had gotten a hold of the story and started to run with it. The story had legs. That is when I got worried. Knowing how much the logistics world is misunderstood by “John Q Public”, I figured that the mainstream media had run off blind.

I spent some time with Google news and checked out what the press was saying. While a few writers understood the difference between an O/O and a company driver, most did not. Reading though the reports the range of reporting quality was wide, from uncertainty and fear to doubt that there would be a “strike”. I kept digging and found a trail of threads back to a column that appeared in a Quad Cities newspaper early last week that gave scores of reporters a story idea to work on Friday, when most of the stories appeared. The writer commented on her blog that she had gotten hours of voice mail messages from her editorial column based on an interview with Dan Little, the owner of a livestock fleet in Missouri who posted a on line letter saying that he was parking is fleet on April 1.

If you read Dan Little’s letter, (http://uscattlehaulers.com) the issues are more than fuel. No doubt, fuel is an issue and demands a suspension of federal and state highways fuel taxes. There is a solid gripe about the different DOT violation fines that change from state to state. He is also calling for government oversight on insurance premiums and for the government to prevent larger carriers to self insure. If the 5 points are not met he is shutting down his trucking operation.

No doubt about it, the Independent Owner Operators are getting squeezed. But they are Independent Business People. These drivers selected to run their own business. If they are still locked into rates or contracts that do not allow them to charge for the increase in fuel they have a choice to not accept loads from those shippers, and to locate new shippers. If they can’t afford not to haul, then they will have to go out of business.

If you have been following the industry as a shipper, you know that there is more capacity than there is supply of freight. Some estimates I have seen have been in the 10% - 15% over capacity range. I have not seen the latest stats, but the last numbers that I remember were that the O/O drivers were less than 20% of the total “Transportation Industry” drivers. The economy is soft and the conditions are hard. The business cycle of natural selection is working through the trucking industry. Small trucking companies are shutting down. Single independent drivers that do not have a gig with a major trucking company or a relationship with good brokers are going to get crushed.

I find the story to be ironic. These are Independent Business People. They decided of their own free will to enter into a business that had risks. Now here they are asking for government intervention to “protect” them from the risks of business, risks that they should have realized they could face. They are asking for the rest of the driving public to protect the O/O’s from fuel tax and to impose rules that affect how businesses address risk. These drivers chose to become Business People, and now that they cannot survive the risk of business, they want the rules to change.

I suspect that most O/O’s are going to drive on Tuesday. They have bills to pay, and the only way the bills get paid are is the freight gets hauled. The Business People who happen to drive for a living understand that fact of Business. The ones that park are drivers, not business People.

Dan Little is swinging his bat hard. The news cycle last week gave his cause, and the cause of the other independent O/O’s some wind in their sails. But the chance of a shutdown by the O/O’s really making a dent in the issue is very limited, because the guys who are making the fuss are independent truckers. 

The independent drivers are a herd of cats. And how hard is it to herd cats?

Posted by Dave Schneider on March 30, 2008 | Comments (2)