With truck and driver shortages wreaking havoc on their supply chains, some companies find themselves contemplating what was once unthinkable: starting their own fleets.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
It wasn't too many years ago that private fleets seemed to be under siege: In the corner office, they were often viewed as a burden on the balance sheet and a cost center whose operations were completely tangential to the company's core mission. But private fleets have proven resilient, and as for-hire carriage gets more expensive and trucks get harder to find, they seem to be making a comeback. Private fleets may not be cheap to run, but they do offer substantial benefits for some businesses—particularly those with predictable routings, the potential for backhauls, and prickly customers who won't tolerate late or missed deliveries.
It's not that private or dedicated fleet managers are exempt from the problems that plague common carriers—a dwindling supply of drivers, hours of service regulations, astronomical fuel costs (60 cents a gallon over year-earlier costs in mid-June), and so on. But the DC manager who knows he controls his trucks may just sleep a little better at night.
Given the climate, it's probably no surprise that observers are reporting a resurgence of private fleet operations. Gary Petty, president and CEO of the National Private Truck Council (NPTC), a trade group whose members operate and manage private fleets for U.S. businesses, reports that most of his group's members (who represent about 500 private fleets) are expanding or plan to expand their private fleet capacity. In many cases, he says, they're using their fleets to generate cash, selling unused fleet capacity on the open market. At the same time, he reports, some businesses that had given up their private fleets are beginning to explore reviving their fleets.
Desperately seeking trucks
Petty sees several reasons for the revival of interest in the private fleet option. "It's increasingly difficult to get capacity that meets [customers'] delivery expectations," he says. "It's often hard to get at any price. And in cases where you can get it, the price is going up dramatically. Price is in the hands of the carriers. They can pick and choose their customers. That puts the manufacturer or the distributor or the retailer in the unenviable position of being at the mercy of the market."
As a corollary, Petty says some businesses are seeing captive capacity as a component of shareholder value—not only as an assured means of moving freight, but as a valuable marketing tool via the advertising on the sides of the trucks. "That sends a powerful message as well as meeting the transportation needs of the company," he says.
Though he acknowledges that private fleets face the same difficulties finding and retaining drivers that bedevil their for-hire counterparts, Petty believes that private fleets enjoy a few advantages. "The pay is usually better in private fleets," he says, "and working conditions are better. Institutionalized care and feeding programs make private fleets more favorable than others." As evidence of that, Petty points to the results of a survey conducted by NPTC of 200 companies with private fleets. The survey results showed annual driver turnover in the range of 11 to 16 percent—far better than truckload carriers, many of which have turnover rates of 100 percent or higher each year.
Total dedication
Executives whose companies manage dedicated fleets for their customers agree that the capacity shortage is motivating companies to reconsider the private and dedicated options. Gordon Hale, vice president of dedicated operations for Schneider National Inc., says that over the last 15 months, he's seen an explosion of demand for dedicated contract carriage, in which a customer contracts with a third party for exclusive use of fleet drivers and equipment. "People want to lock up capacity," he says, "particularly after the surge of '04. They want to tie up capacity before the surge of '05.
"The second thing I've seen is private fleet owners struggling to find drivers, and they're seeking folks like us to help supplement the fleet," says Hale. "That's driven by the driver shortage." The driver issue affects dedicated carriers, too, of course, although Hale says that for Schneider, finding drivers for those fleets has been an issue only in some regions, like the Northeast and Midwest.
Hale adds that he believes some businesses are turning to companies like Schneider because they want providers that can offer not only trucking, but also the ability to integrate with intermodal, third-party and one-way fleets. He cites the example of one customer with a DC-to-retail operation that needs 10 trucks on Mondays, five each day Tuesday through Thursday, 15 on Friday, and 10 on Saturday. "In the old days, we would size that to a 10-truck fleet. Drivers would sit idle Tuesday to Thursday and some of the Friday freight would be delayed. Now, we can meet the requirement with a baseline of five trucks dedicated. We take the next piece of the surge with a third party, saying we need five trucks on Monday, Friday, and Saturday, giving them three days' worth of freight. For the extra five on Friday, we can cover that with our one-way drivers."
David Bouchard, senior vice president of U.S. supply chain for high-tech and consumer products for Ryder, has also seen an upsurge in the dedicated-fleet business. "We have seen more activity this past year than we've seen in the past several years," he says. "I agree that the capacity situation in the overall market is a factor."
But Bouchard thinks there's more to it than just shippers looking for ways to get around the capacity crunch. "At the end of the day in my mind, a prospect decides on a dedicated operation for service reasons. We see opportunities for companies that have not had dedicated in the past or are looking to make changes in modes or providers. ... Where there can be an engineered solution and improvement in the system to reduce total cost, that's where we see an opportunity."
Like Hale, Bouchard believes customers looking at dedicated carriage see it as part of a bigger picture. "The approach Ryder tries to take is not to focus on the dedicated carriage solution, but to examine movement of product. We try to assess that and come up with the best combination of services to meet the customer's service and cost needs. That's usually an integrated solution."
Like nearly everyone close to the trucking industry, he sees the driver shortage as a serious issue. That includes the private and dedicated sectors of the business. "When families sit around the table, I'm not sure that a lot of them are encouraging their kids to pursue truck driving as a career," he says. "The market should do more to recognize the importance of the driver."
Bouchard echoes Petty's opinion that dedicated and private fleets have advantages over common carriers. "One of the benefits for dedicated is that we make efforts to factor in quality of life into our designs. Being able to be home creates value to [drivers] and their families." That, he says, leads to employees who are more attentive to the service requirements of customers. "A lot of benefits accrue from it."
No shortage of problems
Of course, the driver shortage is by no means the only issue plaguing the trucking industry. Exacerbating the driver shortage are the hours of service rules that took effect at the beginning of last year. Those rules placed new limits on driver work hours, forcing changes in carrier, shipping and receiving operations around the nation. A court challenge has left the fate of those rules uncertain. Right now, they're back in the hands of the Federal Motor Carrier Safety Administration, although Congress may step in and impose the disputed rules.
Petty says that his members generally support the rules, and in some cases, have found them to be unexpectedly favorable. "What we didn't expect that has happened is cooperation and a willingness to find a middle ground for getting access to DCs," he says. "People are realizing that under hours of service, there's really an incentive to ... get in and out and optimize the allowable drive time," he says. "I think the argument can be made, although not in all cases, that there are more opportunities for productivity [improvements] under the new rules. I just hope we don't go back to the drawing board."
Hale agrees that the rules have had a big impact on truckers' operations. "Hours of service have definitely changed the way we operate," he admits. "We have to go to the marketplace to cover that cost. It takes a lot of communication to help customers understand those costs."
Rising fuel costs have also spurred private fleets to focus on ways to boost productivity. In mid-June, nationwide diesel costs averaged $2.31 a gallon, more than 61 cents above year-earlier levels, and with oil selling at close to $60 a barrel, there's no relief in sight.
Those skyrocketing fuel prices, Petty says, have led to redoubled efforts to improve fuel economy. "Companies are putting in incentives to ensure that drivers are operating in the most efficient way possible," he says. He notes that the NPTC has launched online fuel economy workshops, sponsored by Cummins Engine, on its Web site.
Other efforts to control costs involve expanding use of on-board technology, Petty says. The goal, he adds, is more than capturing operational data to improve efficiency; the monitoring tools also enable fleet managers to measure their costs against the market. That's especially valuable, Petty says, if the fleet is operating as a profit center. "There's not a lot a trucking company can do about the cost of fuel or insurance, but they can do a lot to mitigate the unnecessary costs that flow from not paying attention to things." One example: he cites a study by the Federal Motor Carrier Safety Administration that showed that tires 2 percent under the correct pressure can add $500 to operating costs through wear and tear and reduced fuel economy.
Heading for a meltdown?
Though private and dedicated fleets may be finding conditions more favorable than they've been in years, that's not to say they foresee a rosy future. They still face severe challenges, as does the entire U.S. transportation network.
Petty is worried that unless industry and policy-makers address many of the issues facing the network and do it soon, the nation could face a transportation meltdown of sorts. "When you look at the long-term perspective, what the volume of freight is going be, and the pressure on the infrastructure in the next 20 years," he says, "you realize we're ... hitting the wall, where with a lack of drivers and the increased demand for goods, we're going to have a logistics crisis. Add to that the huge congestion getting in and out of major markets—especially with some communities not improving access, but figuring ways to restrict access—and there is a time bomb ticking."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."