Letters: Trucking’s Future, Broker Controversy
By now, everyone involved in trucking has experienced in some way a shortage of truck availability — and we’re only in the beginning of the second quarter.
Transport Topics’ April 26 issue had a front-page story on fleet failures that quoted some interesting statistics from Avondale Partners: More than 7,100 carriers have been lost since the middle of 2008, with 730 failing during the first quarter of 2010. (Click here for previous story.)
If the average of 46 trucks per carrier Avondale counts for the most recent failures is extended to the whole 7,100, it works out to more than 326,000 trucks currently off the road.
The last report from the Cleveland Research Group shows only 10% excess capacity nationwide — the lowest number I’ve seen this early in the year.
We are in uncharted territory for planning, rates and availability projections. Summer, fall and the next Christmas rush will test our pa-tience, fortitude, attitudes and ability to plan for the future.
Yes, the economy is showing some promise, but keep in mind that as soon as the banks think they can get more money by repossessing and reselling the equipment they’ve financed for carriers still on thin financial ice, they’ll force them out of business, reducing capacity even more.
CSA 2010 also is looming, and some predict it will cause the loss of at least another 100,000 trucks.
The various freight boards are showing very poor weekly truck-to-freight ratios — as well as many trucks staying close to home. Are they only running regional or are they off the road?
Here are some tips to make it through this period:
• Don’t play the vulture. Sure, rates will be higher and they should be, but there is no reason for a vanload from Chicago to Houston to cost $5 a mile.
• Plan at least 48 hours ahead and teach your customers to do the same. Capacity already is upside down and will get worse by late summer. If customers learn to plan ahead, we might be able to avoid some future headaches.
• Keep a positive attitude. Ac-cept that this situation didn’t happen overnight and it isn’t going away overnight, either. Figure on tough times for at least a few more years.
• Plan properly. Learn what it takes to run a truck — taking into account truck payments, fuel costs, driver costs, truck incidentals and other factors — and rate your freight properly. Know and understand what is happening with fuel prices. For example, if you are going to British Columbia right about now, expect to pay close to $5 a gallon. Put your rates where they are fair for the carriers and the owner-operators. We can’t afford to lose any more trucks.
Daniel Mitchell Jr.
CR Danstar Transportation LLC
Guest writer David Dwinell’s “Opinion” in the May 10 edition seriously blurred several important facts about brokers and carriers. (Click here for previous Opinion piece.)
I disagree with him in some of his statements — and the statistics used to support them.
For example, I’ve not heard that “18 out of 19 brokers” fail for reasons of taking on primary liability. That’s 95% of brokers failing, based on this one risk. Though I agree that some shippers’ misappropriation of primary cargo liability risk onto the broker indeed harms both shipper and broker equally, the statistic seems preposterous.
Nor have I heard of any study showing $1.5 billion in “unnecessary broker commissions” in 2009 costing carriers. The term itself has no meaning. When a broker earns freight from a shipper and offers that freight to a motor carrier at a mutually agreed upon price, any commission earned is fully earned by that broker.
If carriers don’t need brokers, or don’t want to allow brokers to earn a commission on freight they haul, the carrier has every right to find shipper customers for itself by creating steady runs, making hundreds of phone calls each week, hiring sales staff, making visits to shippers, flying around the country, visiting with people and earning their trust and earning the business for themselves without the use of brokers, sales agents or other outside sales channels.
Viewing broker commissions as a “cost to carriers” is naive, misguided and a misnomer. The fact that a carrier may have had the opportunity to gain higher revenues, through selling its services better may be a lost opportunity cost, but that has nothing to do with the broker and everything to do with the carrier.
Dwinell also suggested changing the language used for defining what constitutes a broker. I can’t imagine a worse scenario. If we need to do anything, it’s to make tough civil or criminal penalties for frauds and thieves who broker, but don’t have broker authority.
We must insist that carriers don’t broker loads they can’t handle with their own trucks or through legitimate owner-operators operating under the carrier’s DOT authority. If a carrier uses any other carrier or driver, not operating under its own DOT authority, it is brokering freight, and the carrier must do so through its own licensed broker operation and have permission from the shipper.
Finally, the op-ed writer said that there is no penalty for absconding with motor carrier funds. This is untrue. Almost any business in the nation that extends credit not secured by collateral has legal and professional recourse against the party that doesn’t pay. That is inherent in any business in any industry.
Chief Executive Officer
Tucker Company Worldwide
Cherry Hill, N.J.