Shippers Locking Up Trucks Ahead of Feared 2012 Shortage

ATLANTA — Shippers and brokers say they anticipate freight perils ahead in 2012, with a looming lack of truck capacity that could be exacerbated by a possible reduction in drivers’ allowable hours, according to comments during a recent industry event here.

“Shippers are trying to lock up capacity as best we can now,” said Wayne Johnson, manager of global carrier relations for Owens Corning, Toledo, Ohio, speaking during the meeting of the Transportation Intermediaries Association, Intermodal Association of North America and the National Industrial Transportation League earlier this month.

Johnson and others in the shipper community spoke against the backdrop of an expected revision of the hours-of-service rule that currently is under review by the White House’s Office of Management and Budget.

Along with the prospect that driver hours could be cut from 11 to 10 daily, freight customers are facing an uncertain economy for 2012, when economic forecasters surveyed by Bloomberg News are now expecting about a 2% rise in gross domestic product on average, a far from robust improvement.

Despite these developments, Johnson was certain about one aspect of the freight cycle.

“We know we will be short of capacity in February,” Johnson said, because business volumes recover after typically slowing down around Thanksgiving until picking up before the start of the traditional spring shipping spurt for home and garden products and other freight.

A capacity shortage “may not be here today, but you will see it as time goes on,” he added.

Gary Palmer, True Value Hardware’s senior director for transportation, predicted dire consequences if the Federal Motor Carrier Safety Administration follows through and cuts allowable driver hours to 10, as it has suggested. “It will hurt everyone,” Palmer said.

“It will make trucking operations . . . much less productive. It will put more trucks on the roads. It will increase the costs of goods and services, and constrain the economy much further,” he said.

Palmer isn’t alone in his beliefs.

“I am really concerned about the driver hours,” said Mike Cramer, Owens Corning’s director of logistics and customer operations. The company makes 400,000 truck shipments annually and spends about $500 million on freight. “That’s a big deal for us. It would instantly create a severe shortage,” he said.

When asked the same question about concerns for 2012, Vic Springer, supply-chain director for SP Newsprint Co., said simply, “Mike covered it,” referring to Cramer.

“There is no way this [hours of service change] will be good for the economy,” said Terry Bunch, chairman of the National Industrial Transportation League.

“We need to be globally competitive, and this would exacerbate the situation,” said Bunch, who is director of logistics and customer service for forest products firm Rayonier Inc.

“When the capacity crunch does come, it’s going to be harder on all of us; that’s one of the concerns that we have,” said Jeffrey Tucker, CEO of Tucker Co. Worldwide Inc., Cherry Hill, N.J., a broker and logistics operator. “Generally speaking, we’re seeing capacity is manageable now.”

Tucker’s approach, he said, is to work with shippers as the company has been doing “since two springs ago, when we really thought that capacity was going to start to get tight. Several customers are heeding that warning and recognize that they don’t want to go through ’03, ’04, ’05 all over again, when capacity was such a difficult thing.”

Johnson also said shippers will have a new emphasis.

They will seek more volume commitments from their carriers and will turn to brokers to cope with capacity surges early next year, he added.

Tucker warned that this approach has pitfalls.

“The key in accessing capacity when dealing with brokers is, they’re not the safety net,” Tucker said. “Don’t call them in at the last minute.”

“If you work now to get the carrier in, and you treat that carrier well and give them some decent lanes as well as the tough ones, it’s amazing how effective that is when you need the trucks,” Tucker added. “But if you wait until 700 people are calling for that truck, it’s too late.”

“What we are hearing from our members, and shippers who are not our members, is that they are scared that it [reducing driving hours] will take a bad situation and make it worse,” said Bruce Carlton, president of NITL.

Paul Bergant, executive vice president at J.B. Hunt Transport Services and president of its intermodal unit, voiced a comment echoed by rail officials at the meeting as they assessed the effect of driver hour changes and a scarcity of drivers.

“It won’t take much of an [economic] uptick until all of a sudden customers are going to seek intermodal,” he said. “These changes are going to happen.”