Since I don’t live too far from Dallas, I decided to go the Great American Truck Show (GATS) this week. It was at the Dallas Convention Center. I usually try to attend a “truck show” every couple of years. The Mid-America in Louisville is held in March and it’s the biggest and the best. Las Vegas has a good one and there’s one in Iowa that’s pretty good (plus they’ve got giant pork chops on the menu).
I like going to truck shows. Many of our clients are trucking companies and some of their managers and executives go to the shows. So it’s a great opportunity to meet and greet a lot of folks in one place in a very short period of time. But the main reason I go is that I like trucks. I grew up around trucks and spent over 25 years in the transportation industry before becoming a headhunter. It’s amazing to see the new technology and innovations. All of the equipment just keeps getting better and better. From a “hardware” standpoint, the industry is in pretty good shape.
But, this equipment is of no value on its own. Equipment is only one part of the “Real World Truck Show” (RWTS) formula. The RWTS needs freight, capital, roads, energy and drivers. And it would appear that all of those elements are hard to come by these days. Freight demand is okay, but only because capacity is tight. Capacity it tight because the most important actors in the RWTS are drivers and there aren’t nearly enough them. When freight demand grows (and it will) and assuming capital for more equipment is available (and it will be eventually); there simply won't be enough drivers. Rates will go up and more money will be available for the drivers. But some estimates are that driver pay, benefits, perks and training costs may have to increase by as much as 50% in order to attract truly qualified and capable people into the industry. If that happens, the overall cost of highway transportation will increase 15-20%. That will push some freight on to other modes (rail or inland waterways) and, in some cases, result in certain products just not getting to market.
And then there are roads and energy. The RWTS needs fuel and right-of-way. It’s reasonable to assume that the cost of fuel and taxes will increase 25-50% over the next decade. This will add an additional 10-20% on to the cost of highway transportation. (That’s assuming we have a rational energy policy that includes aggressive petroleum exploration and production along with the development of alternative fuels. If we don’t do that, all bets are off and the rest of this discussion is irrelevant).
So now we’ve increased the overall cost of moving goods over-the-road by 25-40%. The North American economy is so dependent on highway transportation, that this type of cost increase would stifle economic growth for decades. We’re talking about major shifts in populations and production just to offset this cost increase. Lifestyles will change and not for the better. Some folks dream of going back to self-sustaining villages where we all walk or ride our bicycles down to the market every day for a loaf of bread and locally grown fruits and vegetables. (And forget about that cheeseburger, animals will only be allowed in petting zoos). A little bit of this “village” economy is a good thing. But, turning the clock back 150 years across the board would be a disaster.
So the time has come where we must look at better ways to transport products. Equipment technology must continue to improve. We need a 50% improvement in fuel efficiency over the next decade. We need to move larger loads and utilize all available capacity. A 25% improvement in capacity utilization (to include larger, combination trailer configurations) is a reasonable goal. Highway improvements are a must. We need more highway capacity, including truck only lanes connecting major markets. The entire pick-up & delivery, load/unload process has to be streamlined. Packaging and material handling has improved significantly over the past 20 years but we need to do more.
All of these issues have been cussed and discussed for years. We have made some progress. But we are falling behind, especially on highway improvements and the training and development of a new generation of drivers. I’m not a big fan of government involvement, but these are two areas where the government must take the lead. The issues are too big for companies or an industry to tackle on their own. How do we pay for it? It’s tough, but we’ve got to make meaningful changes to social security, medicare/medicaid and military spending. And we have to increase tax revenues. (Notice that I didn’t say just print more money). All of these steps will be painful. And the jobs created building roads and driving trucks won’t be nearly enough to offset the pain. But if we don’t step up and address these issues, life as we know it North America will cease to exist. A lot of people don’t realize it, but we really do need the RWTS.
Saturday, August 27, 2011
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