Manufacturers Are Benefiting from Trucking Industry Growth and Reduced Shipping Costs

The U.S. Freight Transportation Forecast compiled by the ATA says that, in 2010, the trucking sector accounted for 81% of total revenue and 67% of tonnage for transportation companies. The forecast suggested that overall revenue for the industry will rise nearly 66% and tonnage will increase 24% by 2022, according to Genco.com.

The New York Times recently reported growth in trucking as a result of declining fuel costs and greater efficiencies in the industry. These benefits, coupled with an improved economy, increased consumer spending and greater factory output, which are, in turn, increasing demand for truck freight.

“When trucks use less fuel, shipping costs go down.”

In the months ahead, the current reduction in fuel prices may lead to more flexible shipping options, such as less than truckload (LTL) vs. full truckload (FTL) shipments, preferred by some manufacturers, but largely unavailable in recent years, as shippers and manufacturers did all they could to keep trucks full and, conversely, keep prices down.

Also helping growth is that in June, the Environmental Protection Agency and the Transportation Department jointly announced regulations to increase fuel efficiency and reduce emissions from heavy-duty trucks. “These efficiency standards are good for the environment—and the economy,” said Transportation Secretary Anthony Foxx. “When trucks use less fuel, shipping costs go down.”

Not everyone agrees, however. While some truck makers say they can adapt to the new requirements, others claim that the new technologies will be too costly. The Wall Street Journal reports that a new rule requiring truckers to use electronic logging devices (ELDs) on all shipments will likely improve efficiency, but could have a negative impact on smaller trucking companies and owner-operators.

Perhaps the biggest challenge faced by trucking companies today is the shortage of big-rig drivers. According to the ATA, some 35,000-40,000 more drivers are needed. This means fewer trucks on the road, and higher costs as a result.

Some companies have simply decided to handle their own shipping. Take, for example, Ashley Furniture Industries, a family-owned business, which is located far from any major cities or economic centers, and 30 miles from the nearest Interstate highway.

Ashley’s solution was to create its own shipping operation. Today, the manufacturer has 800 trucks, used to deliver most of its products to retailers. Nearly 3,000 employees—about 25% of the company’s U.S. headcount—work in transportation and warehouse jobs. Special equipment is used for speed loading, and the trucks carry other companies’ loads on return trips.

But this approach is not for everyone. Industry experts point out that it is highly unusual for manufacturers to operate their own transport fleets. For most manufacturers, outsourcing shipping functions to a third-party transport service leads to greater reliability and cost savings.

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Betsy Grover McGrath
Betsy Grover McGrath is a writer and editor based in Fairfield, CT. Her work has appeared in 1to1 Magazine, On Wall Street, Financial Planning, and Frozen Food Age.

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