Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The first thing to know about the concept of truck driver outsourcing is that it is not—pardon the pun—reinventing the wheel.
The practice of so-called driver leasing is commonplace in the world of warehouses and distribution centers. And the flex-staffing model has long been standard operating procedure in many other industries.
But in the trucking business, where old habits are hard to break and where procedures governing manager-driver relations are deeply ingrained, flex staffing is hardly mainstream stuff. In an industry where labor can account for up to 70 percent of a firm's operating costs and where companies are leaving no stone unturned in their quest for greater efficiencies, however, applying the "variable cost" model to the economics of the driver workforce may be an idea whose time has come.
"We're getting our foot in the door more frequently today than we were five years ago," says David Broom, CEO of TransForce Inc., a transport staffing firm based in Springfield, Va.
ProDrivers, a unit of Atlanta-based staffing company Employbridge, shares that optimism. "The case for driver outsourcing has never been stronger than it is today," says CEO Chip Grissom.
Under the outsourcing model, the staffing firms, not their customers, keep drivers on the payroll and meet all related expense and benefit obligations. They, not their customers, absorb such potential liabilities as workers' compensation, unemployment costs, and wrongful termination claims. They may not train the drivers, but they ensure the drivers they hire are trained and in compliance with all applicable regulations. They can quickly dispatch drivers in an emergency, or they can supplement a customer's in-house workforce with "dedicated" drivers who behave like full-time employees but are paid by the staffing firm.
Proponents say the savings can be big. In a white paper released earlier this year discussing the trend, ProDrivers laid out three scenarios involving an actual customer with a 52-person driver workforce. The first scenario utilizes 50 company drivers and two "supplemental" or seasonal drivers. The second has 40 company drivers, 10 "dedicated" or full-time equivalents, and two supplemental drivers. The third is a "contract insourced" relationship where all 52 drivers are ProDrivers' employees.
The cost savings ranged from 2 to 12 percent for the first scenario, 7 to 16 percent for the second, and up to 20 percent for the third, according to the white paper. Grissom acknowledges the company's projections are often met with skepticism from prospective customers. He says, however, that ProDrivers can prove that the savings are there, depending on the specifics of a customer's situation.
A blip on the radar
To be sure, the approximately 2,500 drivers on the two firms' collective payrolls are a blip on the radar screen of an estimated 3.4 million Americans holding commercial driver's licenses for all vehicle types. And it would be a stretch to say that many for-hire motor carriers are embracing the idea of outsourcing their driver pool.
"From the executives I speak with, I do not hear a lot of attention being directed at this issue," says Bruce Jones, president of KSM Transport Advisors LLC, which provides financial advisory services to mid-sized truckload carriers.
Jones says most truckers understand the "inherent limitations" of managing non-employee drivers and as a result, have robust driver recruitment and retention processes already in place. He also doubts whether efficiency initiatives such as outsourcing, which may gain popularity in weak economic times, will endure when conditions improve and freight volumes pick up.
According to Grissom, management's loyalty to its in-house drivers is the main reason companies do not pursue outsourcing. Other factors, he says, are the perceptions of loss of operational control and that drivers employed by staffing firms are less qualified and reliable than their counterparts at the carriers.
Driver staffing firms say their drivers are as qualified and as reliable as those working for trucking firms. Jeremy Reymer, president and CEO of Driving Ambition Inc., an Indianapolis-based driver staffing firm serving Indiana and Ohio, says he requires at least two years of verifiable experience, and that no driver can have more than two accidents or two moving violations in the past three years. In Indianapolis, the company's main market, there were only six "no-show, no-call incidents" (where a driver fails to show up without an explanatory phone call) out of nearly 11,000 dispatches in 2008, according to Reymer.
Grissom says ProDrivers strives to create a positive working environment for drivers, keeps customers fully informed about driver performance, and ensures that its drivers are of the same quality as those who work directly for their carriers.
Broom of TransForce stresses the stability of his own workforce to counter concerns about driver reliability. "We've had drivers employed here since 1991," he says.
Broom adds that one of his main challenges has been educating companies on the "true cost" of keeping drivers on payroll. "A company may pay $15 an hour (in base wages) for a driver and then we come in at $24 an hour," he says. "They don't understand what's involved with the $24 an hour." He says the $9 differential covers the "soft" costs of employment and payroll expenses, health insurance, vacation pay, and the convenience, flexibility, and peace of mind of knowing a support system is in place to supply them with drivers as needed.
A success story
One operation that doesn't have to be educated is Ryder Integrated Logistics' Phoenix facility, which provides third-partly logistics (3PL) support to Ford Motor Co. After some internal debate, the facility in 2002 opted to use ProDrivers rather than put drivers on payroll to serve the facility. "We decided to give it a year, to play it by ear and see if it would work," says Erin Holmes, Ryder's customer logistics manager at the facility.
Ryder has been very satisfied with the relationship, according to Holmes. The ProDrivers operation is transparent to Ford, and there hasn't been a safety issue in two years. And while the ProDrivers wages are not necessarily lower than what Ryder would pay, the ancillary savings—especially in the workers' compensation area—are significant, she says.
For ProDrivers, which generates about 70 percent of its business from the so-called seasonal category, the next objective, according to Grissom, is to expand into more strategic relationships, where drivers are deeply embedded in its customers' operations. Virtually all ProDrivers customers are 3PLs and private fleets, though the company is eliciting some interest from the for-hire category, he says.
TransForce doesn't have those issues. As much as 65 percent of its business comes from strategic, long-term contracts, with for-hire truckers accounting for about one-quarter of its customer base, according to CEO Broom.
Staffing firms are confident about their prospects, no matter how the economic winds blow. On one hand, they say, many drivers like the freedom and flexibility of not being tethered to one trucker, and their drivers feel they are treated better with them than when they were payroll employees. On the other, as companies downsize their internal recruitment and human resource staffs, they will increasingly turn to outside partners to deliver services that had been performed in house, they contend.
And what happens when the economy recovers, freight volumes build, now-idled capacity returns to the road, and the old driver-shortage bugaboo returns?
The staffing firms appear unconcerned. As they see it, their services will remain in demand as truckers, private fleets, and 3PLs scramble for drivers. "We had driver shortages from 2004 to 2006, and we doubled our business during that time," says Mike Mitchell, area vice president for ProDrivers.
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."