Despite a levelling off in US vehicle sales, car carriers hope to carry on expanding as new technology makes them more efficient. But there are potholes to negotiate, as Automotive Logistics finds out...
The car haulage industry in the United States has begun to experience the inevitable – a decline in the growth of new vehicle volume and deliveries. However, whether or not 2017 sets another sales record or leads to decline, carriers are forging ahead with plans to grow and improve efficiency.
Indeed, thanks in part to new legislation permitting longer car carriers, many companies are still investing in new trailers and in technology, optimistic that their businesses will not be negatively affected. Our recent survey of 15 carriers reveals they expect to increase their average fleet size by more than 11% by the end of 2017, while refreshing more than 6% of existing fleets.Nevertheless, competitive pressures, including declines in some segments and a greater focus on cost among OEMs, have led to an increase in cooperation among hauliers in areas like load sharing, as well as between road and rail carriers.
Concerns have been rising about regulatory changes, from driving and working hours to emission and pollution limits. The new administration of [sta_anchor id="1"]Donald Trump has pledged to curtail regulations, though the degree to which this might impact on the trucking sector is far from clear. In the meantime, carriers are facing a growing number of new rules.
Slowing trendsLast year the US eked out another gain for 2016 at 17.55m. This year is expected at similar levels, although some analysts forecast retraction in the years ahead.
This is not necessarily bad news for the car haulage industry, however, since a slight decline in volumes could help it improve flow efficiency, says Robert Farrell, executive director of the Automobile Carriers Conference (ACC).
“As vehicle production slows down, carriers are breathing a sigh of relief that things are not as hectic as they have been,” he says. “There is less congestion in the supply chain, which may lead to the loosening of bottlenecks, although it would be more centred on rail than on truck. With relatively lower sales of 17m units, it will be like a return to normal to operate at 100% capacity instead of 120%.”
William Schroeder, general manager of the Auto Haulers Association of America (AHAA), points out that vehicle deliveries are just one component in a large and diverse auto haulage market that includes remarketed vehicles. “The secondary market – vehicles from dealers, fleets and wholesalers – is three times the size of the new market,” he observes. “Although many of these movements have been depressed in the past five years, they will balance out with the slowdown in new vehicle sales.”
Richard Binkley of US AutoLogistics: the drive to survive has led to more cooperation between road carriers in the past 18 months than in the past 18 years
Despite slower growth, however, some carriers believe they can achieve similar volumes to 2015, or even higher.
Richard Binkley, vice-president of US AutoLogistics, based in Houston, Texas, says the company expects to maintain its current business level despite a more challenging market, including more cost pressure from OEMs.
“The market has become much more competitive than it was for the past three years,” he says. “It is a bit more difficult to maintain partnerships with other truckers. There is downward pressure on pricing and geographic lanes are not guaranteed. Furthermore, procurement has taken over some logistics functions [at carmakers]; it has become more of a commodity-based industry, which makes a difference in prices.”
Some carriers have grown more than others. Mark Anderson, president and chief operating officer of car carrier United Road, says its volumes have increased in double-digit percentage terms for new and [sta_anchor id="2"]remarketed vehicles throughout the US and Canada in 2016, which it expects to continue.
“Although new vehicle sales will level off, United Road is picking up greater market share with new contracts,” he asserts.
Cooperating for efficiency gainsAs United Road grows, it faces challenges with supply chain inefficiencies. “The visibility and reliability of shared information needs to progress more in order to remove waste and improve velocity,” says Anderson. “For example, the process to locate, inspect and load vehicles continues to take far too long. Certain yards have problems with space availability. Every hour lost in loading is time that would be better spent on the road delivering cars.”
Anderson says the timing of vehicle receipts and the accuracy of forecast volumes also impede efficiency, such as predicting railcar unloading quantities and timing, and determining vehicle locations in the yard. The good news, however, is that the car haulage sector has been having productive meetings with its rail and OEM partners about sharing information on the timing and location of unloads.
Binkley says the industry has seen more cooperation between road carriers in the past 18 months than in the past 18 years. “Survival is the main impetus,” he explains. “In addition, working with railroads is something new and we are pleased that they have become involved. Hopefully, we will be benchmarking best practices together.”
"The market has become much more competitive than it was for the past three years... it has become more of a commodity-based industry, which makes a difference in prices." - Richard Binkley, US AutoLogistics
AHAA has also extended its outreach to railways and carmakers in an attempt to speed up flows by focusing on dwell time at rail ramps in particular. Among its recent projects, the organisation initiated a collaborative effort with the railways to enhance facility throughput and safety. This effort has involved sharing experiences, data and practices among hauliers and rail providers.
At a railyard in Philadelphia, Pennsylvania, for example, carriers and railways have been testing a ‘geo-bay’ concept to improve facility throughput. This entails sorting the railyard into sections to minimise the driver’s distance to pick-up, with vehicles sorted by OEM or destination.
“Originally, the railroad wanted truckers to back into parking spots, which is the least safe approach,” says Tom Ogradowski, business development manager at Brothers Auto Transport. “The railyard also wanted to increase inventory space, but backing in trucks had the opposite effect. We helped to bring carriers together in order to analyse this issue and, as a result, the design was changed.”
[sta_anchor id="3"]“Vehicles are getting out a lot faster,” says ACC’s Farrell of the new yard layout. “At railcar unloading, cars going to one specific area go in one spot. That means less walking by drivers to find cars placed by railroads or their contractors. The normal method was to place vehicles in the first open spot.”
Dealing with regulationsThe latest federal highway bill, known as the Fixing America’s Surface Transportation (FAST) Act, which was approved in December 2015, brought some improvements for the vehicle logistics industry. For example, maximum carrier length was increased for the first time in 28 years, from 75ft to 80ft (22.8 metres to 24.4 metres) for a stinger-steered transporter. While a lack of increase in weight has limited carriers from loading more vehicles, Bob Farrell points out that carriers can increase the spacing of vehicles on a rig, helping to reduce damage. The change also allows increased clearance between tractor and trailer, which can cut damage potential when turning.
“We also achieved nationwide uniformity for carrier overhang allowances, which have increased to 4ft in the front and 6ft in the rear,” says Farrell. “This means stingers can hold three or four cars on the tractor. These changes will enable better equipment utilisation that will benefit vehicle shippers, as well as carriers.”
United Road has introduced the recently approved 80ft units to its fleet and expects to have 85 such units in place by the end of 2016. “However, although our industry has benefitted from the new law that allows the length extension, we are still working to educate certain state enforcement agencies and clarify the intended interpretation of the law,” Anderson says. “The absence of a weight increase to accompany the longer length prohibits us from gaining the additional capacity that we hoped for, although sometimes we are able to add an extra unit and we do expect to see other efficiencies and modest cost savings from the new law.”
Despite equipment improvement, carriers are still concerned about mounting regulations and their different interpretations. “For a deregulated industry, trucking is very much regulated,” Farrell says. “Of concern to ACC is that in California, the authorities want to establish additional requirements for driver meal breaks that are far in excess of the national standards defined by the Federal Aviation Administration Authorisation Act (F4A).
“This would increase trucking costs since more labour would be required to transport the same number of vehicles,” he continues. “The issue is that California courts have repeatedly failed to recognise that federal pre-emptions of the law under F4A apply to interstate trucking operations. Instead, California requires meal breaks for truck drivers in addition to the time-off requirements that are already in place.”
This issue has also started to crop up in New York and could spread to other states. “ACC is fighting to reaffirm the federal regulations,” he says.
Another concern is the EPA Greenhouse Gas Requirements Phase 2, finalised in August. “Under these regulations, trailers are not affected except for a requirement to use low-rolling-resistance tyres. However, the big question is whether tractors need to make modifications in order to reduce emissions,” says Farrell.
[sta_anchor id="4"]At United Road, Anderson also points to electronic logging devices, emission standards, state and local wage laws, sleep apnoea provisions, hours of service provisions and speed limit restrictions on a growing list. “All of them add cost and complexity to the industry,” he says.
Technology developmentsCarriers hope to improve efficiency to counteract higher regulatory costs and a slowing market. Electronic delivery tools that capture signatures for proof of pickup and delivery, damage inspection, location and pre-delivery notices are one way to improve costs, but carriers are at different stages in their implementation of ePOD technology.
Auto Transport Group, based in Farr West, Utah, uses the technology for about 20% of its units, according to chief executive Brent Larsen, while others have higher rates.
“Cost is one barrier to implementation,” he says. “Another is the need for adoption by all OEMs. There is also a pushback from dealers that want to use paper documents. It may take up to five years to implement ePOD fully.”
“Most carriers are well into the ePOD phase,” says Binkley of US AutoLogistics. “The next step is a single pane of glass – incorporating processes such as vehicle delivery and hours of service, lodging, and fuel stops on the same tablet.”
Among the AHAA’s current projects is to support the creation of a universal platform for its members to exchange loads regardless of ePOD or OEM processing requirements, says Schroeder. The platform is intended to take disparate technology and eliminate the disparity.
Anderson also wants to use technology to reduce empty miles.
“We are in the final stages of testing our patented LoadSolver tool that should improve the velocity with which we move cars, as well as our operational efficiency. We plan to implement the technology fully across the country by the end of the first quarter, 2017,” he says.
The LoadSolver tool will provide a view of inventory and optimised load plans every five minutes using releases from railheads, ports and plants, which Anderson says will be more automated and responsive than United Road’s previous load-builder.
Binkley is also interested in such technology. “Load building programmes have been available for several years. However, the process is still difficult because there are many types of vehicles and trucks,” he comments.
Dean Pearson, chief executive offer at Centurion Auto Logistics, based in Jacksonville, Florida, suggests that load sharing among carriers has increased within the last 15-18 months because of more efficient technology and the resulting timeliness of information. “Relations with OEMs are improving because more information is available in real time,” he says. “When one provides important information more [sta_anchor id="5"]quickly, there is more trust.”
Such trust could be even more vital as the industry enters a period of some uncertainty.
"Of concern to ACC is that in California, the authorities want to establish additional requirements for driver meal breaks that are far in excess of the national standards defined by the Federal Aviation Administration Authorisation Act (F4A). This would increase trucking costs since more labour would be required to transport the same number of vehicles." - Robert Farrell, Auto Carriers Conference