Truckload TransportationBudget Considerations

The industries number one challenge to driver shortage.The industries number one challenge to driver shortage.

ATA/TT/Stifel Equity

Regulations!!!

Three major regulations having the most impact on fleets and driversThree major regulations having the most impact on fleets and drivers1. CSA 2. HOS reset 3. Upcoming ELD’s

9/26/2010 7/9/2017Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

12/11/2010Compliance/Safety / Accountability

Nationwide Deployment

07/01/2013Hours of Service

(Reset) Current

Regulation Compliance Date

10/15/2013Sleep Apnea Testing

Law signed preventing FMCSA from issuing

guidance without rule making.

03/26/2013Drug & Alcohol Clearinghouse

Notice of Proposed rule making filed

05/21/2014Medical

Certification RequirementsCertifications

renewals must performed by

FMCSA registered professional

October 2014 Drug & Alcohol Clearing House

Requirement Date from

MAP 21

Spring 2015Electronic Logging

Devices (ELD’s)Rule making

December 2014

Speed LimitersRule making

Spring 2017Electronic Logging Devices

(ELD’s)Anticipated final adoption

deadline

January 2017CAFÉ and GHG StandardsClass 8 Model Year 2017

Standard implementation

Implementation Legal Proceedings Key Events

Regulations are driving the next Capacity Crunch

Source: FTR Associates and BB&TCM analysis / Stifel Equity

1 Safety information and carrier ratings2 Special state regulations on trucking (ex: CARB)3 Opening the border to trucking4 Elimination or allowing of illegal aliens5 Variety of health regulations (apnea, medical certificates, etc.)6 Require ELDs or electronic logging devices7 Hours of service changes8 Increase broker bond & require prompt payment of carrier charges9 More stringent temperature and cleanliness requirements

10 Encourage union membership and require benefits for Ics11 Examination of fleets for patterns of violations12 Prevent shipper coercion regarding HOS, CSA, etc.13 National drug clearinghouse14 Requiring standard training procedures15 Test new carriers for proficiency16 Increase minimum insurance coverage for carriers17 Tightened OSHA requirements18 Hold shippers and brokers responsible for hired carriers' safety19 Limit max governed speed (64 MPH)20 New vehicle stability controls

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Implied Driver Hires Per Quarter Required By Regulation

Electronic Stability controls

Speed limiters

Safe Harbor

OSHA Worker Protection

Minimum Insurance

Entry Proficiency

Training Provisions Driver Effect

Drug & Alcohol Data Base

Prohibition Of Coercion

Pattern Of Violation

Employee Free Choice

Safe Food Transportation

Capacity Crunch

In addition to the three major regulations, there are a significant number of other ones that are in various stages of implementation and rule making.

I.E. Coercion Rule, Hair Follicle testing, Vehicle Stability….

Projected over 160,000 additional drivers needed by 2016 to support new regulations

According to Univ Tenn, Loads over 500 miles will suffer the greatest impact. Requiring more drivers to do the same amount of loads prior to HOS 34hr reset rule

Lost productivity

Pressure points for failures:- Insurance; CSA scores

driving up cost- Driver wages up due

lower productivity- Truck cost up as much

as 49% due to EPA regulations

- Utilization, low cash flow

Approx. 85% of capacity is registered to fleets with 100 units or less.

Regulations: >EPA-Fuel Economies > CSA- Safety Ratings > Electronic Logs (ELDs)

Entry into market tougher Due to high cost of regulations. As fleets exit the market

pressure mounts for utilization of current fleets to support customer demands.

Fleet Failures

6

In the past, when a fleet failed the drivers moved to another company. On average each fleet represents 22 drivers.

Today, fleets are failing in part because drivers are unqualified under the new regulations.

Now approx. 16% of the drivers per fleet are coming off the market with every fleet failure.

Trucks / Drivers off Market

The measurement complexities

Basic Crash Indicator Algorithms

CSA could cost the industry about 122,000 additional driver hires.

At $7,000 a hire that is a $854 M cost hit.

Lost productivity from the churn, the cost approaches at least $1B in added cost.

In one year it is about a .2% cost hit.

Noel Perry FTR associates

The initial hit for a random route fleet attempting to run legally is a 5-7% hit on productivity due to the elimination of "quasi-legal" operation.

That equals a $.10 to $.15 per loaded mile increase in cost.  For a fleet that is running substantially illegally it is higher

. ELD, real time information will provide improved

driver availability.

The positive effect, after a few years, would approach 10%. Increase in utilization.

Monitoring Load/Unload times After a few years of adaptation, the devices will become a benefit, by increasing driver availability. Through monitoring Load/Unload times

FTR associates

Electronic Logging Devices (ELD’s)

Equipment: EPA emission and other regulations have increased Equip. cost approx. 30% since 2010. From $105k - $135k (owner operator)

Insurance / Overhead; Increases do to in part to, CSA reporting / scores provide details of carrier fitness.

Wages ….continue to increase due in part

to regulation reducing driving time and fleet utilization

Cost Impact of Regulations

The aging driver pool

For-hire and private fleet driver age distribution.

Characteristics of the Job:

Physically demandingIrregular hours

56% of the drivers in for-hire fleets are 45 or older.

22.% above 55 a little bit more than half are in the 62 plus category, eligible for retirement in terms of social security income.

Stifel Equitt / FTR Assoc.

Drivers Needed

The Impact of Regulations

Source: ATA Benchmarking Guide for Driver Recruitment & Retention

Drivers Needed Per Year Over the Next 10 Years: 96,178

Drivers Needed

Why Drivers LeaveIt’s a Shipper & Carrier Problem

14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Have Not Lef t A Trucking Job

They Were Running Me Too Hard

I Just Wanted To Make A Change

Didn't Get The Right Loads, Or Enough Loads

Didn't Get Home Enough

Lack Of Recognition & Respect

Pay

28.8%

16.5%

7.3%

13.8%

22.3%

18.3%

29.8%

38.0%

28.0%

15.9%

9.4%

10.4%

18.4%

23.8%

34.1%

42.9%

Source: BBTCM analysis and survey.

Why Did You Leave Your Last Trucking Job?

Owner-Operator Company Driver

Pay & Respect

Why Drivers Leave

• Inflation adjustment uses consumer price index. • Average annual pay data from May of each year. • Source: Bureau of Labor Statistics 16

The Trucking Industry Needs More Drivers

August 9, 2014

“Trucker Pay Has Fallen When Adjusted for Inflation

The industry complains of shortages of truck drivers, but in real terms tractor-trailer drivers made less in 2013 than they did a decade earlier.

The numbers are revealing: Even as trucking companies and their trade association bemoan the driver shortage, truckers — were paid 6 percent less, on average, in 2013 than a decade earlier, adjusted for inflation. It takes a peculiar form of logic to cut pay steadily and then be shocked that fewer people want to do the job.” Neil Irwin, New York Times

Maybe It Needs to Pay MoreMaybe It Needs to Pay More

Average annual pay, heavy and tractor–trailer truck drivers, in 2013 dollars

1. Be away from home for prolonged periods2. Eroding wages due to increase in road

expenses3. Increase traffic congestion4. Increase wait time5. Speed governor set at 63 mph6. Maintain acceptable CSA scores 7. Continuous drugs and alcohol testing 8. Sleep in the truck’s sleeper compartment9. Sleep erratic hours10. Pay for his/her living expenses while on the

road 11. Continuously monitoring (by in-cab event

recorders/cameras)12. Optimized routes (company fleets)

Overdrive Magazine

Factors adding to the lack of interest in over the road driving careers:

Drivers restrictive life style

Job life style

What can Shippers Do?

Respect: – Understanding and supporting the driver’s needs & lifestyle– Provides updates: ETA’s on getting in the bay to start loading– Helpful staff, paper work handled with professionalism &

consideration.– Treat drivers with respect and as a valuable network asset.– Understand what impacts driver pay( Miles per week)

Parking: Before Load Appointment & Overnight– Signs: shipping office, loading area

Amenities– Microwave– Vending Machines: Not just a candy bar.– Restrooms, not a Porta-Potty– Showers

Tarp:– Wrapping or Tarping Machines – Eliminating unnecessary Tarp..

Dwell Time: Quick in and out

Flexible pick up delivery times: Utilize every available driver hour due to HOS regulations

Source: TCM/Overdrive Magazine

Ways to make business more driver/ carrier friendly:

Reasons for not driving

19

Generous unemployment benefits (99 weeks) currently available to Americans;

The burgeoning “underground economy” which provides tax free income resulting from part-time work mowing lawns, plowing snow, etc.;

The evolution of stricter driver hiring criteria (relating to health, safety record, substance abuse history, etc.);

The intrusion of technology into the cab, which has the net effect of pushing away drivers who are uncomfortable with the “big brother effect” created by this technology;

The aging driver population has created a scenario where more older drivers retire or leave for health reasons than are added from driver training schools

The expansion of private fleets, which offer more regular routes, more home time, and greater annual compensation.

Source: Overdrive Magazine

Solutions to the Capacity Crunch

• Shipment Variability– Flexible pick up and delivery windows– Scheduled days for delivery– Spreading out large volume shipments to one destination

• Shorter Lead Times– Set schedule for orders allowing for sourcing consistency– Reduce the constraints on short lead time orders

• No timed deliveries• Take multiple types of equipment• Take deliveries outside of delivery window

• Transportation Inflation– Increase lead times, avoid dedicated and spot market– Smooth out shipping variability– Flexibility to use capacity when available

Shipper Collaboration

• What is it?– Shippers working together to create round trips or continuous moves

• What does it do?– Helps better utilize carrier capacity

• Less dead head or empty miles• Helps carrier burn less fuel and driver is more productive• Builds lane consistency reducing costs and improving service

• Why is it necessary– Carriers are struggling to grow in size– Utilization of exiting equipment / resources is easier than growing the

physical amount of assets– Better driver utilization may help mitigate inflation by helping carriers

manage costs

Landstar – Shasko AgencyTroy Shasko tshasko@shasko.com

800-733-1118 xt 222