Trucking Concerns

If you think your distribution costs are high now, just wait until new government regulations become effective later this year! What? You didn’t hear?

I love the free market. I love it when barriers to enter a market are low, and the most cost-savvy companies offer the most competitive rates. Competition in the marketplace goes a long way toward keeping the prices of goods and services contained.

When the free enterprise system is allowed to operate with minimal interference, consumers benefit.
Unfortunately, government regulations will soon be imposed that may constrain the free market that most of us hold dear. The regulations may eliminate much of the competition that keeps trucking healthy.

The issue at hand is the government’s desire to place new standards on truck drivers and trucking companies. While safety is important to all of us in the industry, the regulations may have some unintended economic effects on the industry.

Readying For Regulations

The federal government’s plan, which has been in the works for six years, will bring the nation’s truck capacity to its lowest point in recent history. These regulations are expected to go into effect in November and industry estimates show the number of trucks available to you, the shipper, could fall as much as 20 percent. So, if you think truck capacity is tight now – and that rates are high – just wait until these regulations go into effect.

Current truck capacity is down already, and rates are up, due to the following:

• Banks will not finance trucking company startups.

• Banks are drawing in credit lines for existing trucking companies.

• The available driver supply is falling (baby boomers are retiring).

• The poor economy has forced more truckers into bankruptcy than any year on record.

Eventually, the free market would “fix” these problems. In a free market environment, the rising rates caused by low-truck capacity would entice people to start new trucking companies or expand existing ones. Banks would be happy to lend because trucks would be in demand and rates would rise. As the economy came out of the recession, shippers would continue to demand more and more trucks to move goods all over the country – and the trucking business would expand. As more truckers entered the market, transportation prices would stabilize and ultimately fall due to higher competition. The cycle is then complete, only to be repeated again over a 4-to-7-year period.

If you are thinking that this is Economics 101, you are right. However, the government’s plan may hinder this normal cycle, and that could cause your transportation rates to go through the roof – and potentially remain inflated for a long time to come.
For clarification, the FMCSA (Federal Motor Carrier Safety Association), which licenses truckers and truck brokers, has regulating authority to an extent never seen before in the industry. Under the moniker CSA 2010 (Comprehensive Safety Act 2010), the government’s plan is to flush out all the truckers and brokers it labels “unfit to operate.”

The existing SafeStat system, which measures truckers’ safety records, contains four Safety Evaluation Area (SEA) categories. The CSA 2010 system will divide carrier and driver safety performance data into seven categories: 1) unsafe driving; 2) fatigued driving based on hours of service (HOS) compliance; 3) driver fitness/health; 4) controlled substance or alcohol; 5) vehicle maintenance records; 6) improper loading of cargo; and 7) crash indicators.

Expect A Driver Shortage

While on the surface this seems like a good idea, the effects are going to be profound. For example:

• Drivers will be “scored” – even for a warning or a leaky tire, not just a ticket. The scores are based on a rating system of 1-10, with 10 being the highest, most severe rating. Operating while driving under the influence will warrant a rating of 10. A leaky tire warrants a rating of 8. Drivers with high ratings, or companies that hire marginal drivers, will be pushed out of the industry. Drivers who are fired for an accident or two (even small ones with no damage or speeding tickets) may not be hired by another carrier.

• Electronic On-Board Recording devices (EOBRs) will monitor how many hours a driver has been “on the clock” (which includes loading and unloading time). As soon as his time is up (currently about 11 hours per day), he is forced to park and take a rest, even if four hours of his time was spent driving and the rest was spent waiting to load or unload. This rule will reduce the number of hours the driver is available to drive. For growers, this means your loads that have 15 stops will be rejected by carriers unless you are willing to pay a hefty fee for each additional stop.

• The cost of running a truck will increase due to the mandatory annual safety training and testing. The EOBRs alone will cost $1,500 to install in a truck (every truck). The costs of mandatory training, safety directors and driver checks will increase costs even more.

• Carriers will be forced to get rid of older tractors and trailers in favor of newer, more “EPA friendly” ones (which, of course, cost much more). If carriers cannot meet the new guidelines regarding equipment, they will need to cease operating that truck or trailer until they can.

• Drivers who are deemed “unfit” (even for mechanical failures of their equipment) will be forced to stop driving until enough time has passed that their ratings are no longer “unsatisfactory.” Should the driver choose to deliver his load after receiving an “unfit” rating, he will be fined no less than $11,000 per day.

The bottom line is simple. Drivers and carriers willing to haul plant loads will become fewer and farther between. Live goods loads generally consist of multiple stops. With the imposition of an 11-hour day (with no cheating possible), drivers will not be willing anymore to sit idle while being loaded or unloaded – and not getting paid. Instead, they will choose loads with only one delivery so they can spend those 11 hours on the road making money.

As stated previously, we are already seeing higher rates and lower capacity due to the economic climate. The drivers and carriers out there want more and more money because, frankly, they can get it. You might not be willing to pay their rates but there are desperate shippers out there who will. Once the new government regulations are phased in, rates will rise further, and quickly, with no free market mechanisms to correct them.

When the economy eventually does pick up again (it will one day) and shippers are looking desperately for trucks to move the increased amount of freight out there, the rates in some parts of the country will almost certainly double. That is exactly what happened in certain parts of the country during this spring – rates doubled in some areas and the carriers were in complete control of our destinies.

At a trucking conference I attended recently, one large national carrier CEO said during his keynote speech, which included some large national shippers, “During the last decade you, the shipper, controlled the rates and we struggled to make money; the next decade is payback time.” Be prepared.

Leave a Reply

2 comments on “Trucking Concerns

  1. The ugly part of this is that this only affects American Drivers Canadian and Mexican Drivers do not have to meet our standards. while the Canadians usually have safe trucks. the Mexican drivers are usually driving junk. I used to be a driver and they scared eveyone out there!
    growers can get strraight trucks that fall under these guidelines.

  2. The ugly part of this is that this only affects American Drivers Canadian and Mexican Drivers do not have to meet our standards. while the Canadians usually have safe trucks. the Mexican drivers are usually driving junk. I used to be a driver and they scared eveyone out there!
    growers can get strraight trucks that fall under these guidelines.

More From Finance/Operations...

March 2, 2015

Avoid Surprises On The Delivery Dock

A call in advance about problems with a plant shipment to a retailer you supply goes a long way toward customer satisfaction.

Read More
Janeen Wright

March 2, 2015

Deliver Plant Quality That Trumps Price [Opinion]

The industry's goal is to have loyal customers who return to the same plants time and time again, not because of price, but owing to a plant brand that shouts top-notch garden performance and is synonymous with excellence, which gives them the secure knowledge that their investment will be worth every hard-earned cent.

Read More
Heuch Pink Fizz_featured

March 2, 2015

Intergeneric Crosses Are A New Perennial Trend

Intergeneric crosses, oddities some botanists say are an impossibility, have made serious inroads in the perennial world.

Read More
Latest Stories
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More
Andy Higgins

February 3, 2015

MasterTag Names Andy Higgins As Its New President

Former CEO and president of Ecke Ranch, Andy Higgins, joins MasterTag as its new president. He brings more than two decades of industry experience to the position.

Read More
Syngenta Bioline Hires Ronald Valentin For Technical Lead Role

January 28, 2015

Syngenta Bioline Hires Ronald Valentin For Technical Le…

Ronald Valentin has been appointed technical lead for Syngenta Bioline, effective January 2015. He will be responsible for technical support of Bioline biological control agents and will be instrumental in helping growers develop integrated pest management (IPM) solutions.

Read More

January 27, 2015

Give Equal Time To The Number Crunchers

Before investing in a new business opportunity, check in with the financial gurus of your organization to make certain you have the cash flow to back up your efforts.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 20, 2015

Bailey Nurseries’ Purchase Of Plant Introductions Inc. …

When Bailey Nurseries purchased its long-time breeding partner, Plant Introductions, Inc. (PII), in early January 2015, it freed the PII team to concentrate on what they do best: develop new plants. Bailey Nurseries will take on the business management side of the partnership, but otherwise the relationship it has enjoyed with PII for years will be largely unchanged.

Read More
Plant Introductions, Inc. partners Mark Griffith, Dr. Michael Dirr and Jeff Beasley and Bailey Nurseries President Terri McEnaney.

January 13, 2015

Bailey Nurseries Acquires Plant Introductions

Bailey Nurseries has acquired Plant Introductions, Inc. (PII), effective January 1, 2015. PII has developed numerous innovative new varieties that have been marketed worldwide, many introduced by Bailey Nurseries.

Read More

January 7, 2015

How Inflation Affects Your Business And Why You Can’t I…

Awareness of the true increase in costs after inflation is a necessary part of good financial management for greenhouse operations.

Read More

December 4, 2014

New Developments In Shipping/Logistics Software

Improved shipping and logistics software from Picas Software and MapMechanics makes it easier for growers to plan loads efficiently and automate day-to-day distribution planning.

Read More
Fritz Dramm

December 2, 2014

Dramm Corporation Welcomes Back Fritz Dramm

Dramm Corp. recently welcomed Fritz Dramm as the new fertilizer production and compliance manager. Dramm previously worked at the company through high school and college, and is back after 20-plus years.

Read More
Sarah Harwood

November 24, 2014

Take Control Of Your Operation’s Succession Planning Pr…

Proper business and estate planning with your intentions clearly expressed can ensure your goals for the future of your business are fulfilled.

Read More

November 24, 2014

Succession Planning For Growers

Succession planning is a sensitive subject, but one that needs to be addressed when deciding on your operation's legacy. Greenhouse Grower caught up with two growers who shared their process and provided tips for a smooth transition.

Read More

November 24, 2014

BrightFarms Pioneers Hydroponic Greenhouses For Urban A…

BrightFarms brings fresh, local produce to underserved areas with hydroponic greenhouses located on neglected urban spaces.

Read More

November 10, 2014

NGB, AFE To Join In #GivingTuesday On December 2

The American Floral Endowment will participate in #GivingTuesday on December 2, a national movement to encourage charitable giving.

Read More

November 8, 2014

Amid Drought, Californians Talk Water

As extreme drought conditions continue, the state looks at how it manages its resources, while growers try to conserve and meet changing consumer needs.

Read More