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March 23, 2009 3:35 AM, EDT

Fleets Struggle to Achieve Productivity Gains

Overall Adoption of Technology Remains Low
By Daniel P. Bearth, Senior Features Writer

This story appears in the March 23 print edition of Transport Topics.

The ability to track the location and contents of trailers, in theory, can help carriers haul more goods in fewer trailers.

Those efficiency gains, however, have not yet resulted in significant reductions in the number of trailers or the ratio of trailers to tractors for many fleets, vendors of trailer-tracking systems, fleet executives and equipment ex-perts told Transport Topics.

One reason is that the number of trailers equipped with tracking systems remains relatively small. And, according to equipment suppliers, many fleets aren’t using the technology to its full potential.

“Overall, penetration is still very low,” said Homaira Akbari, president of SkyBitz Inc., one of four major providers of trailer-tracking systems in North America.

Akbari estimated that 700,000 trailers out of a total population of 5.3 million are currently equipped with trailer-tracking systems. And that number represents only 20% of 3.5 million trailers used primarily to haul freight.

“We are not at a point yet where you see a change in the overall market,” Akbari said.

Fleet executives noted the recession is making it difficult to sell trailers that are no longer needed, so it is harder to bring down the ratio of trailers to tractors.

Eric Starks, president of FTR Associates, a company that tracks commercial truck equipment trends, said the number of trailers purchased each year compared with the number of tractors has remained almost constant at 1.5 trailers per tractor since 1975.

“Anecdotally, some fleets are reporting better productivity. But does that mean they are able to operate with 1,000 fewer trailers or 100,000? We don’t know. The impact is not measurable based on information we see,” he said.

In 2008, 1.35 trailers were purchased for every one tractor, compared with 1.87 trailers per tractor in 2007. Both figures are in the normal range, based on historical data, Starks said.

Among fleets that have installed trailer-tracking systems, the ratio of trailers to tractors has actually gone up, according to an analysis of eight publicly owned truckload carriers by FTR.

At J.B. Hunt Transport Services, for instance, the ratio of trailers to tractors was 4-to-1 at the end of 2008 compared with 3.6-to-1 in 2002, when the company installed its first tracking system, according to FTR.

In 2008, J.B. Hunt replaced its original analog-based tracking system with a satellite-based system for approximately 24,000 of its trailers.

The company declined comment for this story, but said in a recent filing with the government it planned to sell about 1,100 trailers.

Norm Ellis, vice president of transportation and logistics sales and service at Qualcomm Enterprise Services, said a number of “macro” economic trends are making it harder for fleets to reduce trailer counts and lower the ratio of trailers to tractors.

A shift to rail from highway transport, for instance, has added an element of uncertainty to delivery schedules and shortened the average length of haul.

“Fleets don’t know how to be as efficient with intermodal because you are at the mercy of other forces,” Ellis said.

Shorter lengths of haul mean drivers are picking up and dropping off trailers more frequently, which usually necessitates having more trailers available for loading and unloading.

Slowing sales also have led some major retailers to hold up shipments and to use trailers as rolling warehouses, Ellis said.

Wal-Mart Stores, the nation’s largest retailer, for instance, has added 8,500 trailers to its fleet between 2006 and 2008, going from 44,500 to 53,000 units, while the number of tractors during the same period increased by only 100 units from 7,100 to 7,200.

The company began installing a trailer-tracking system from General Electric to help manage its growing fleet of trailers in March 2006.

Darryl Miller, chief operating officer of GE’s Asset Intelligence unit, said big fleets can achieve “significant reductions” in trailer counts, but the main benefit over time is the ability to better utilize existing assets and thus avoid buying more trailers as the company grows.

“The key in my mind is making [trailer tracking] part of a [freight operating] system,” Miller said.

For private carriers, such as Wal-Mart, and many dedicated contract carriers, trailers are reserved for the exclusive use of one shipper, which limits the ability to reposition empty trailers.

“Our customer base uses a lot of trailers,” said Kevin Slaughter, vice president of operations for James Brown Trucking, a Georgia-based contract carrier that provides service to many retailers.

The carrier installed its first system in 2002 when it had about 800 trailers. Now the carrier manages a fleet of 2,700 company-owned trailers and another 550 shipper-owned trailers.

Despite a relatively high proportion of trailers to tractors — 5.2-to-1 — Slaughter figures that without trailer tracking, he would need another 5% to 10% more trailers to serve shippers’ needs.

Officials with the trailer-tracking technology vendors said there is evidence that carriers with tracking capabilities do operate with fewer trailers than comparable companies without the technology.

A survey conducted by CSMG Global for SkyBitz found the average trailer-to-tractor ratio for 25 for-hire fleets surveyed was 2.9-to-1 prior to installing trailer tracking, and 2.5-to-1 afterwards. The average trailer-to-tractor ratio for the 15 largest for-hire carriers in the United States and Canada was 2.7-to-1.

The average SkyBitz customer was also able to reduce the number of trailers rented each year and eliminate the majority of new trailer purchases within four or five years, CSMG reported.

For a 3,000-trailer fleet, the money saved over five years equates to $19.8 million from reduced trailer purchases, fewer trailer leases and rentals, lower trailer maintenance and de-creased tire purchases, said study author Rajesh John.

Ray Kuntz, chief executive officer of Watkins & Shepard Trucking, said earlier this year in a statement that using products from Skybitz had cut operating expenses and cargo theft.

However, the study noted that most users “are not maximizing the technology’s potential.”

Vendors also pointed out that the technology can help improve efficiency in ways that have little effect on the number of trailers.

For example, the use of sensors to monitor temperature can reduce fuel to power trailer refrigeration.

“Cold chain management is coming on strong,” said Brad Aitken, business development director for GlobalWave, a tracking system offered by TransCore Inc. “Spoilage is a big issue.”

David Sward, GlobalWave general manager, said big fleets are making use of trailers, but aren’t “decommissioning” the extra equipment right away.

“The equipment is on the sidelines to take advantage of future opportunities,” he said.

Officials at Werner Enterprises, where about 4,000 of its 25,000 trailers are currently outfitted with tracking devices, said poor market conditions have made it difficult to balance its fleet of tractors and trailers.

Werner cut back its truck fleet by 550 units over the past year, but has been unable to make comparable reductions in trailers.

“There’s not great demand for used trailers right now,” said Steve Phillips, senior vice president of operations at Werner.

“Trailer tracking absolutely reduces the need for trailers. The problem today is we have excess trailers,” he said.

As a result, Werner’s ratio of trailers to tractors actually rose to 3.2-to-1 at the end of 2008, from 3-to-1 at the end of 2007.

Phillips said Werner tracks the number of days trailers are idle and, by that measure, the use of equipment with tracking systems has improved by as much as 25%.

At Knight Transportation, a regional truckload carrier based in Phoenix and one of the first companies to adopt trailer tracking, officials insist that the installation of tracking systems has changed the way it operates and reduced the need to buy as many new trailers.

“Sales guys would say that if we had more trailers we could do more business with customers. So we’d rent trailers and then put trailers on order to buy,” said Steve Grover, Knight’s vice president of communications. “Now, we can look at the data and if trailers are sitting for 25 days then we won’t have those kinds of conversations anymore.”

With the cost of a dry van trailer running about $20,000, any drop in the trailer-to-tractor ratio represents a significant savings in capital expenditures, Grover said.

Officials at truckload carrier Schneider National Inc., also an early adopter of trailer tracking, said they have been pleased with results after installing a tracking system that included cargo monitors and hook-up sensors on about 38,000 dry van trailers.

“It is performing as advertised,” said Paul Mueller, vice president of technology services. “We do believe we are operating with fewer trailers.”

Mueller said “thousands” of excess trailers have been re-moved from Schneider’s fleet since tracking technology was installed in 2004 and the company’s ratio of trailers to tractors has fallen to around 2.5-to-1 in 2008 from 3.3-to-1 in 2005.

Rather than focus on the ratio of trailers to tractors, however, Mueller said a better measure of efficiency is the percentage of time a trailer is empty.

“We’ve seen a double-digit reduction in that measure,” he said. “It’s not a bad thing to have more trailers if they are generating revenue.”

Mueller said there’s room for further improvement.

“Technology can create information, but it’s up to us to build systems and processes to use it,” he said.

Some fleets continue to hold off on adopting trailer tracking.

Bruce Stockton, vice president of maintenance and asset management for Con-way Truckload, said he tested several systems on his fleet of 8,200 trailers over the past five years.

“In the end, we couldn’t justify the expense,” Stockton said. He said shippers are not willing to pay extra for the technology.

Instead of tracking trailers, Stockton said that his company relies on an in-cab communications to keep shippers apprised of freight moves.

By adding more team drivers and focusing on on-time pickup and delivery, Stockton said that Con-way Truckload has managed to reduce its ratio of trailers to tractors to 2.8-to-1 from 3.2 over the past two years without trailer tracking.