To Marc Scribner of the Competitive Enterprise Institute, the only good economic regulation is no economic regulation. On the transport battlefield, he has much work to do to keep government out of the equation.
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.
There's an old maxim that "oil and water don't mix." In Washington, D.C., a living, breathing example of that would be the Obama administration and the libertarian think tank known as the Competitive Enterprise Institute (CEI).
The administration believes increased regulation is often needed to restore fairness and balance to the nation's economic system. The CEI, by contrast, espouses "free market" economic principles and strenuously opposes government involvement in business affairs.
Marc Scribner, who coordinates CEI's freight transportation activities as its land-use and transportation policy analyst, is a true believer in the free market. His sights are firmly set on any effort to either increase existing regulations or turn back the deregulatory clock. Two of his current targets are proposals to change the rule governing a truck driver's operating schedule, known as "Hours of Service" (HOS), and moves by Democrats in Congress, supported by certain shippers, to reintroduce some level of regulation into the railroad industry more than 30 years after it was deregulated.
Scribner spoke recently with DC Velocity Senior Editor Mark Solomon to give his take on the two proposals, what's behind them, and the potential consequences for industry.
Q: A CEO of a major truckload carrier recently told us the proposed HOS rule would force his company to add four or five more trucks to handle the same volume of freight it transports today. Do you think that's an exaggeration?
A: This is certainly possible depending on the nature of the freight being moved, the makeup of his work force, and the geographic distribution of his client base. For most carriers, I suspect the proposed rule would have a somewhat smaller impact, but the impact is certainly negative.
Q: Another trucking executive has said the revisions are a bone thrown by the Obama administration to the Teamsters union to essentially pad driver rolls. Do you believe the proposed changes are politically motivated, or are there legitimate safety concerns that would justify a rewrite of the HOS rule?
A: This proceeding is entirely of political origin. At the behest of the Teamsters and far-left, anti-business [consumer advocacy organization] Public Citizen, and prior court decisions involving those two parties, the [Federal Motor Carrier Safety Administration] has been bending over backward to accommodate ridiculous and inefficient rules on drivers' hours of service. This has nothing to do with streamlining the regulatory apparatus to foster socially beneficial outcomes or to improve highway safety. It has everything to do with appeasing left-wing ideologues and an increasingly irrelevant union faced with declining membership and a dangerously underfunded pension fund.
Q: There has been talk that any meaningful change in the current HOS rule will be litigated almost immediately, effectively tying up the process for years. Should carriers and shippers feel secure that nothing will change any time soon, or should they be preparing now to make changes in their supply chains just in case?
A: This is always the trouble with shifting regulation: uncertainty. I will not try to make broad recommendations for an entire industry with a diverse composition of firms, but I would imagine that more risk-averse firms that currently find themselves on shakier financial footing should take very seriously the impact this rule will cause if it is promulgated and perhaps immediately begin investigating what adjustments to their supply chains will be needed.
Q: Have you or anyone at CEI come up with numbers to quantify the cost to the industry of the proposed changes?
A: We have not conducted an independent econometric analysis. However, using the FMCSA's own cost-benefit estimates, minus the extremely dubious "health benefits" contained in the proposed rule's regulatory impact analysis, the economic cost ranges from $30 million to $640 million annually, depending on the percentage of crashes that one assumes to be fatigue-caused. Of course, the burden would be disproportionately borne by small firms and owner-operators, and some have claimed the agency has grossly underestimated the costs. The discredited methodology of calculating supposed health benefits was used by the agency's analysts primarily for the purpose of forcing a non-negative net benefits finding. They did not want to admit that this would be a costly rule for the industry.
Q: Is there a middle ground that would satisfy the industry and the regulators?
A: I would prefer a rule that was far less stringent than the current one and am quite skeptical of the FMCSA's stated core mission in the first place. The current rule, I believe, was forged on middle ground that should more than satisfy regulators, unions, and Naderites.
Q: Turning to the railroads, it appears that any rail reform to satisfy the concerns of captive shippers will come from the Surface Transportation Board, not Congress. What are the chances the STB will act, what's the likely time frame, and what form will "reform" take?
A: Any "reform" from the STB will not be of a deregulatory nature, but I am confident that the board will again resist the attempts of a minority of shippers to drive the railroad industry back into its pre-Staggers [Act] Dark Ages. In late 2011, we should have some idea as to the odds of action with respect to the reciprocal switching issue. Retiring Sen. [Herbert] Kohl's absurd legislation [S. 49] that would remove the railroad industry's limited antitrust exemptions has little chance of going anywhere, and many in the Obama administration are quietly opposed to any moves in that direction.
Q: What, in CEI's view, would pass for "sensible" or "balanced" rail reform?
A: While I generally believe the shippers I just mentioned are completely in the wrong on rail regulation, they are correct in noting that railroads suffer from seriously outdated workplace practices due in large part to the various unions representing different classes of railroad workers. Among other things, we support inserting a straightforward decertification provision into the RLA [Railway Labor Act], similar to the one contained in the National Labor Relations Act, which would allow rail employees to hold an election to decertify their bargaining unit if 30 percent of workers show interest.
Q: The National Industrial Transportation League has requested changes in existing reciprocal switching agreements. Do you see some change in those rules as a likely outcome at the STB, and would the railroads be prepared to accept those as the least onerous type of reform?
A: I would hope not. The STB and the ICC before it have been quite clear on the reciprocal switching issue. Given present conditions in the industry and the lack of any evidence of anticompetitive acts, I do not see how forcing reciprocal switching agreements on the railroads could be justified on economic or legal grounds. The railroads should absolutely reject any attempts to reregulate their business operations.
Q: The railroads argue that virtually all of their traffic is subject to competition, either from other rails or other modes. Captive shippers argue otherwise. Do shippers have a case?
A: The shippers ignore the economics of network industries and why traditional models of industrial organization and competition policy are inappropriate with respect to railroads. Most are unfamiliar with the special risks posed to sunk-investment-heavy industries such as railroads. It is very difficult to reason with people who have no intention of actually understanding the underlying issues of this dispute. I have half-jokingly called on these shippers to form a consortium in order to purchase and operate their own Class I railroad, like Grupo Mexico and Ferromex, rather than wasting everyone's time and money with silly political stunts before the STB.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.