3PLs: trucking recovery on
fragile footing
If confidential comments by executives at three large third-party logistics service providers (3PLs) are any indication, the
long-awaited trucking recovery may be on a very fragile footing, if it’s present at all.
Analysts at the Baltimore-based investment firm Stifel,
Nicolaus & Co. met recently with executives from three “
sizable” 3PLs, all of which are privately held. The firm would not
identify the providers other than to say that they manage, in
aggregate, about $2.5 billion of truckload freight per year.
The 3PL executives gave the analysts some sobering food
for thought. For example, although truckload volumes are
above very weak 2009 levels, the executives said none of
their customers expect much incremental volume growth as
2010 unfolds. In addition, truckload capacity is not disappearing from the market at a rapid clip, the 3PL executives
said. Those observations may come as a surprise to those
who thought that enough supply had been taken off the
roads so as to spark significant rate increases once demand
picked up and began outstripping supply.
As for the rate outlook, the 3PL executives said that while
ad hoc, or “spot,” pricing had improved over the past four to
five months, contract rates “remain under continued assault.”
One of the 3PLs told the analysts that carriers are cutting rates
by an additional 5 to 6 percent on re-bid contracts this year.
The Stifel analysts said some of the 3PL comments square
with reports from other sources that volume growth over the
past six months has been driven by factors like inventory
replenishment, the $8,000 first-time home buyers’ tax credit,
and the “cash for clunkers” auto trade-in program. All of those
trends are seen as providing a relatively short-term benefit to
the industry, giving a temporary boost to freight volumes but
offering no long-term remedies for soft demand trends.
The Stifel analysts say the 3PL executives’ comments have
substantial credibility because the companies’ private status
means they have no incentive to “prop up their stock prices
by putting positive spin on nearly every comment.”
A long-time industry watcher who recently met with three
large carriers agreed that truckers are far from being out of
the woods. The carriers are “still eating anything they find on
the road, and at depressed prices,” the executive said.
According to an index of truckload rates published by
research firm Trans-Research International Inc., the rate for
goods moving from Atlanta to Los Angeles in 53-foot dry van
trailers was $1.30 per mile. That was just one penny per mile
above the average rate paid in 2004. The figures don’t factor
in the impact of fuel surcharges, higher insurance premiums,
and the cost of complying with two federal government
mandates to upgrade truck engines to meet tougher environmental guidelines. ;
short takes
The first Jungheinrich
brand lift trucks manufac-
tured by Mitsubishi
Caterpillar Forklift
America Inc. (MCFA) have
rolled off the line and are
ready for distribution. The
trucks, the first to be built by MCFA under an August
2009 manufacturing and distribution agreement
between the two companies, include 3,000- to
5,500-pound stand-up end control trucks and 2,500-
to 4,500-pound reach trucks. … JHCI Holdings Inc.,
parent of the Jacobson Companies, has acquired
Global Transportation Services Inc., a Seattle-based
company that provides a full range of international
transportation and logistics services. This acquisition
marks another step in Jacobson Companies’ efforts
to expand its international 3PL platform and position
itself as a true global provider of end-to-end supply
chain solutions. … Chicago-based Echo Global
Logistics, a provider of technology-enabled trans-
portation and supply chain management services,
has opened an office in Atlanta. … Hytrol Conveyor
Co. has completed an independent survey to identi-
fy the 10 most important conveyor purchasing crite-
ria used by supply chain professionals. At the top of
the list is reliability, followed (in order) by quality,
safety, maintenance, service, price, throughput, tech-
nology, speed, and green considerations. … As a
result of its recent network optimization efforts,
Averitt Express says it has improved service in
14,000 LTL lanes, cutting transit times and reducing
freight handling. Averitt says the network re-engi-
neering will reduce the company’s total operating
miles by 576,000 annually, saving approximately
100,000 gallons of diesel fuel a year. ... Ultra
Logistics has joined the U.S. Environmental
Protection Agency’s (EPA) SmartWay Transport
Partnership. The SmartWay program is a voluntary
collaboration between the EPA and freight shippers,
carriers, and logistics companies to reduce carbon
emissions. … The San Bernardino Associated
Governments (SANBAG) board has selected Ryder
System as its fleet partner in a unique heavy-duty
natural gas truck rental and leasing project in
Southern California. Ryder will use $19.3 million in
state and federal American Recovery and
Reinvestment Act funding secured by SANBAG to
implement the project, which will mark the first time
that natural gas trucks are deployed in a large com-
mercial truck rental and leasing operation.
