Category Archives: Logistics

Want to Ride the Rails? Go East, Young Man, Go East!

Recently we pointed out that despite the fact that the US has a 100 year lead on China on the rails, China is kicking the USA’s @ss when it comes to rail. It just launched the world’s longest high-speed rail route from Beijing to Guangzhou.

Now, not to be left out, India is getting in on the action. As per this recent article over on The Financial, “Tata Projects [has begun] work on [the] RS3300 crore Eastern Dedicated Freight Corridor project” (EDFC), which it recently won in partnership with Aldesa of Spain. This particular project will lay 337 lines of track between Bhaupur and Khurja in Uttar Pradesh.

Eventually, the eastern dedicated freight corridor (EDFC) project will connect Ludhiana to Dankuni (in the eastern corridor), and Dadri to Jawaharlal Nehru Port, Mumbai (in the western corridor). In addition, the EDFC has been designed for 32.5 tonne axle load, which is at par with America and China, and will increase the speed of freight by up to 100 km per hour.

It’s amazing. North America used to own the rails, but now we’re falling behind the emerging markets, who understand that while a truck is good, a locomotive that can pull ten cars is ten times better. If we were smart, we’d be investing in high-speed rail across the US, instead of bickering about cost distribution between states/provinces and the federal government. A century ago, rails was the future, and it looks like it will be again. Will we realize that before its too late?

So What Are You Doing For Your Drivers?

As per our post on Sunday, where truck drivers are concerned, working conditions are bad, getting worse, and you’re on the fast track to not being able to move 10% of your shipments on time as you’re going to be short 10% of the drivers you need within a decade unless you do something to change things.

So what can you do?

1. Make sure you do everything you can to give drivers good working conditions.

According to this post by Peter Moore over on Logistics Management, some distribution centres force drivers to stand in a 10-foot painted circle on the floor near the loading docks while the trailer is being loaded. No restroom, no cell phone signal, and no chair. Are you serious? People charged with crimes get treated better.

2. Make sure your carrier does what they can to give drivers good working conditions.

The carrier should pay them better than average, minimize waiting time by always using dropped trailers for TL, optimize routes to minimize partial loads and stops, and make sure all long haul truckers on routes without an adequate number of safe rest stops have sleeper cabs. In addition, routes should always be planned to ensure that legislative limits are not breached, which will give the driver adequate rest.

3. Make sure the drivers have good medical coverage and care.

Drivers should have a schedule that gives them at least one weekday off a month to schedule a regular doctor’s check-up and should have a plan that allows them to visit a doctor whenever they need to. (In US terms, this means that they should have PPO or POS coverage.)

4. Make sure you support any effort to prevent rest stop closures.

More rest stops are needed. We’re at 90% capacity every night and things are only going to get worse. Support any effort to not only prevent more closures, but to (re)open more rest stops to make trucking safer for all drivers.

And while all of this may not be enough to make a driving career attractive to younger drivers, it should at least stem the surging turnover and buy us the time we need to come up with a better solution.

New Estimates Put the Driver Shortage at 240,000 Drivers!

And, if what I’m reading is right, IT’S ALL OUR FAULT!

But before we get to why, let’s spell out that number. Two Hundred And Forty Thousand! That’s almost double what the estimates were as recently as a year and a half ago! That’s one scary number! How are we going to increase the number of drivers by 10% in the next decade when one third of drivers are going to reach retirement age and the average graduate age from driver training schools is 54! (Which means that the percentage of drivers set to reach retirement age in the next decade is increasing every year and it won’t be long before two thirds of drivers will be less than a decade away from retirement age!)

Needless to say if the American Trucking Associations (ATA) is right and the shortage is 240K, we have a serious situation on our hands. And the severity is only increased if the Owner Operators and Independent Drivers Association (OOIDA) is right and that, despite the fact that some 40,000 new commercial driver licenses are granted by DOT annually, turnover is 100+ percent per year due to poor working conditions.

And it sounds like working conditions are getting worse each year. From my research, this is what the reality of the situation is:

  • truck drivers make an average wage of only 38K per year;
    4K less than the per capita personal income and 13K less than the median household income in the US as of January, 2012
  • truck drivers have to drive up to fourteen hours a day
    and receive roughly 10 hours off before their next shift despite the fact that legislation limits the amount of driving a trucker is supposed to do
  • truck drivers commonly have to work 6 day weeks
  • truck drivers have a dangerous job
    as 12% of all work-related deaths in the US are from truck drivers in auto accidents
  • truck drivers are lucky to earn minimum wage
    when you add up all of the time they have to be on the job driving and waiting (in traffic, at warehouses, etc.)
  • truck drivers don’t always get to eat well
    as evidenced by the fact that only 14% of truck drivers in the US are not overweight or obese
  • truck drivers don’t get good medical care
    as they can’t keep regular appointments with regular doctors and can’t always go to the doctor when they should
  • truck drivers often have to sleep in their cabs in unsafe conditions
    as States are continually shutting down designated trucker rest stops along interstates to cut costs and long haul truckers often have to race for a safe position at truck stops, with over 90% of open spots filled on a nightly basis

In other words, working conditions are bad, getting worse, and since we’re not doing anything about it, it’s all our fault. You take the time to make sure there’s no child labour in your supply chain. You take the time to make sure that your suppliers are paying minimum wage. But do you take the time to make sure that your shippers are treating their drivers well and making sure they stay healthy and safe?

Despite the fact that the US has a 100 year lead on China on the rails

China is kicking the USA’s @ss when it comes to rail. A couple of months ago, China launched the world’s longest high-speed rail route from Beijing to Guangzhou, in South China, which connects the two cities that are 2,298 km apart, in an eight-hour commute! (Source: China Daily) That’s about two and a half times faster than you can commute between two cities using the fastest ground transportation in the US.

It’s bad enough that there’s no Free Market on the Rails, but the fact that this appears to have completely stalled Rail development in the US is just insane. There’s only one route in the entire US that exceeds 175 kph, official high speed, and the average speed over the line is 135 kph. In comparison, the high-speed trains in Japan and China operate at an average of 220 kph and 285 kph!

The sad thing is that it will be at least 15 more years before the US has a decent high-speed rail line, and that’s only if the California High-Speed Rail Authority actually starts to build their high-speed rail line between Anaheim and San Francisco, which seems to be perpetually stalled (as construction has not yet begun and the completion date for the first phase has been pushed until 2018 in their efforts to save a dime while losing the dollar). And if the California High Speed Rail Authority fails, then we’re looking at 2040 before Amtrak builds its high-speed rail between New York and Washington. (Wow! Twenty-seven years to build two hundred and thirty miles worth of track. Are they serious? At the rate China builds high-speed rail lines, they’d have it built in five and a half months! The railroad tycoons must be doing cartwheels in their graves!)

If China continues to progress in leaps and bound across the board in supply chain infrastructure while the US sits still, the Economist will be right and China will overtake America as the world leader before the end of the current administration (which is too busy appeasing the fat cats and slashing its own productivity to notice). It’s a sorry state of affairs, but maybe you should be manufacturing in China — for the emerging Chinese consumer!

Free Market? What Free Market?

In the developed world, we supposedly have a free market, defined as a market structure in which the distribution and costs of goods and services, wage rates, interest rates — along with the structure and hierarchy between capital and consumer goods — are coordinated by supply and demand unhindered by external regulation or control by government or monopolies. (Dictionary.com) However, every time you turn around these days, governments are imposing new policies to restrict free trade (which allows for a free market on a global scale) or failing to abolish old policies that allow monopolies to persist in this day and age.

For instance, after taking steps to bust up the telco monopolies, the U.S. has now made it illegal to unlock your cellphone. (Read the full decision if you like.) In other words, instead of being forced to use one monopoly, you now get to choose between six mini-monopolies. (Now, it’s true that the FCC will investigate the U.S. mobile phone unlocking ban, but it’s no guarantee they will reverse the decision.) The absurdity of this cannot be put into words. (Imagine if you had to buy your TV through the cable company and you couldn’t use the TV again if you switched cable providers. Does this make sense? Basically, the law is saying a telco carrier gets to choose how you use YOUR phone.)

But this isn’t what I’m ranting about today, as this is a Supply Management blog after all. My rant today is about the fact that it’s 2013 and we are still subject to captive shipping in the railroad and inland barge industries because there is no mandated reciprocal switching (in the United States). So, not only are you forced to use the carrier that owns the line your port/warehouse/etc. is located on, but you cannot ship to a destination if that carrier does not service it. Not only does this increase shipping rates by an average of 20% by some accounts, but it forces many shippers to use long-haul trucking way more than they would otherwise need to.

The fact that captive shipping has not been eliminated is costing the U.S. economy billions of dollars each year. As per a recent report issued by the National Industrial Transportation League (NITL), and summarized in DC Velocity, the introduction of new switching rules that would allow for limited reciprocal switching between the nation’s four major railroads could save rail customers up to 1.2 Billion a year. Simply allowing a (truly) captive shipper or receiver to gain access to a second rail carrier if the customer’s facility is located within a 30-mile radius of an interchange where regular switching occurs would shave up to 1.2 Billion off of shipping costs according to the accepted Revenue Shortfall Allocation Method (RSAM) formula. (So imagine how much could be saved if reciprocal shipping was mandated across the board or more freight shipped rail instead of truck!)

The Surface Transportation Board (STB) could use the powers granted to it under the Staggers Rail Act of 1980 and order the railroads to create reciprocal switching agreements between each other to eliminate captive shippers, but since they’ve had thirty three years to do this, and have made zero progress, it’s not likely to happen. So we’re going to have a monopoly until, as the DC Velocity article notes, angry shippers descend on Capitol Hill and demand that Congress update the Staggers Rail Act to include mandatory reciprocal switching. Maybe then we’ll finally have a free market on the rails two-hundred and fifty years after the first railroad* (Montresor’s Tramway) was built in the US.

* Note that the first railway in North America, drawn by horses, was not built in New York, but in Nova Scotia forty-four years earlier to support the construction fo the Fortress of Louisbourg in Cape Breton! (Source: Nova Scotia Railways)