Supply Chain and Logistics

This article indicates that silos between modes of transport are breaking down, and logistics experts are leading their companies to lower cost solutions by being more flexible as well as cultivating relationships.

“Modal Agnostic” – Seeking Capacity When and Where it Makes the Most Economic Sense – Supply Chain 24/7.

A nice summary of the situation and the prospects going forward. It is a broken industry.  But I question the economics of the ATA theory.  Drayage is derivative demand from a perfectly competitive business, container freight. So prices will gravitate to the lowest possible, and in the long run, toward costs.  That means that independent truckers will be forced to accept the lowest possible wage, with little to distinguish one from another.  While we may deplore abridgement of freedoms, such as parking rules and so on, it is hard to see how independent truckers will make more than a bare minimum wage, net of their truck maintenance and operating expense.  And now they must upgrade again to meet the new electronic reporting requirements and inspection paperwork.  With chassis in short supply too, it is hard to see how they will increase their incomes.

It reminds me of family farmers, who deplore their lack of ability to compete with large corporate farms, and who often take outside jobs to make ends meet.  Yet they insist on their right to be independent.  Frequently they call this a lifestyle issue, since the bucolic life has an appeal for us city dwellers.  But in the case of the independent drayage truckers, can many sympathize with independent operation as a lifestyle?  And in farming, small operators can shift to high earning crops such as organic produce and specialty items, whereas hauling a container from here to there has little opportunity for differentiation or niche creation.

I think there is a real risk that the economics of drayage will ultimately force independent drivers out.  The result will be a shortage of drivers, and an increase of freight rates, since maintaining timely service will cost more.  We’ll also see more technical solutions to eliminate short haul port drayage, such as close-in railheads, and automated ship-to-rail shuttle systems.

The Teamsters Are Still Targeting Independent Truckers.