The Roemer Report May 1988

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Trends that will Shape Trucking in the 1990's

The 1980's will be history in just 20 months. It's time to talk about the shape of trucking in the new decade. While some things depend on who's occupying the Oval Office next January, most major changes of the 1980's will stay in place. Trucking deregulation won't be reversed and the trend towards consolidations will continue. The industry also will face unrelenting rate competition and cost pressures which will continue to squeeze earnings. More than ever before, manage rial strategy and skills will be decisive not only in bottom-line performance, but in survival itself. There are both opportunities and problems in these 1990's trends: (1) A surprising comeback in U.S. heavy manufacturing, including steel, is bringing a healthy boost in trucking. (2) Manufacturers want lean inventories. That means more frequent shipments with closer attention to timely deliveries. (3) Nationally, the infrastructure is deteriorating, an ominous issue which requires careful monitoring and response by the trucking industry. (4) Though trucking has benefited at the expense of rail, intermodal developments such as the improved RoadRailer can become significant in both industries. (5) Increased total business has helped produce a driver shortage which isn't likely to ease. (6) A new generation of fuel-efficient tractors is coming on stream, promising cost savings but also imposing heavy initial investment requirements. (7) Safety is an overriding concern for the entire industry, calling for substantive solutions.

NEW EQUIPMENT AND SYSTEMS HAVE 21st CENTURY LOOK: As the year 2000 draws closer, the trucking industry is taking on more of the equipment and smart systems which symbolize the 21st century. It's all being done for practical reasons like cutting costs and boosting both productivity and safety. The changes could be more sweeping and far-reaching than anything in the last 25 to 40 years, according to one expert. Electronics and computerized systems will transform everything from the management and dispatching of trucks to the design of tractors/trailers. Some of the following ideas are poised for the equipment market in the next few years: (1) Engine fuel systems fully controlled by microprocessors. (2) On-board diagnostic systems which automatically target impending trouble. (3) Truly reliable anti-lock braking systems operated by microcomputers. (4) Smart systems which take the guesswork out of shifting gears; The longer-term goal is a computer-controlled transmission. Meanwhile, the already computerized trucking firms will acquire increasingly sophisticated management information systems for tighter control. These advanced systems will pave the way for more efficient dispatching. monitoring of trips and ongoing analysis of operations. Most of this early 21st century technology is already here or on the drawing boards. Though the high initial cost is painful, systems such as computerized fuel monitoring pay for themselves.

INSIDE AMERICA'S MANUFACTURING RENAISSANCE: True or false: The U.S. is a world leader in low-cost production in many industries. The answer, amazingly enough, is true. But how can this be, you ask, in light of recent claims that America has lost its competitive edge? The tide is turning, analysts say. Trade figures notwithstanding. the U.S. not Japan is the "export-led" economy today. Indeed, American exports are up 13% from this time last year, and climbing at thrice the rate of world demand. The cheaper dollar deserves much credit for our dawning trade recovery. And U.S, technical talent-still the best among nations-has strengthened exports of electronic and surgical instruments. But top honors go to manufacturers themselves for having the courage and vision to overhaul systems, slash costs, enhance quality...and sell, sell, sell. Japanese industries, once the leaders in price advantage, now face manufacturing costs akin to ours. Only Pacific rim and Latin American nations can boast powerful price advantages today. But our productivity, so long maligned, can now stand up to any nation's. U.S. manufacturing productivity is hitting its stride again, rising at a pace of 3.5% per year-nearly twice as fast as it did in the '70s.

WHY INTERMODAL HAS TOUGH ROAD TO TRAVEL: Though it helped spice up our language with that versatile term "piggyback," intermodal freight isn't really catching up with domestic shippers. Distribution magazine recently reported that J.C. Penney Co., once an intermodal enthusiast, hasgonebacktolong-haultrucking.Someoftheproblemsofshippingbyacombinationofrailandtruck includemulti-sourceliability poor communications and delays at terminal points. Add to that the fact that many communities are no longer served by rail, and it's easy to see why shippers are balky. It's true that powerful freight trains have a cost advantage over trucks for long-haul shipments. This advantage quickly disappears, however, if shipments miss target dates or require unusual pickup and delivery for points outside the rail systems. Shippers also dislike dealing with more than one carrier contact and arguing with several carriers over liability issues. For all of its current shortcomings, however, intermodal still works for some international shipments and could be bailed out by new equipment. The most promising intermodal idea is RoadRailer, which is essentially a highway trailer with special wheels for service as a rail car. The earlier RoadRailers worked but were too small; the newer ones are more on target and are satisfying heavy shippers like Ford Motor Co. Intermodal could also get a boost from another fuel crunch withspiralingcosts. .

THAT SENSITIVE SAFETY ISSUE: The current focus on airline safety carries powerful lessons for the trucking industry. The message is that the public wants price competition and the other benefits of deregulation, but only if they're perceived to be at the cost of safety. Never mind what the facts say, a few highly publicized "horror stories" can plunge any industry into serious trouble with the public. Enough such trouble, and restrictive, counter-productive legislation is certain to follow. Trucking is particularly vulnerable on this issue because the public tends to judge the entire industry when there's a serious truck­ related accident. Trucking's Achilles' heel is that mishaps by a few slipshod operators and poor drivers can bring the entire trucking businesses into disrepute. This makes it certain that trucking safety will become an even more important public and political issue in the 1990s. Though bad brakes are a cause of many accidents, the driver is seen as the key person. A California Highway Patrol study, for example, cited driver error for 94% of all truck accidents. Additionally, a federal report showed that most truck drivers involved in accidents had no formal training. CEOs can seize the initiative on this issue by continuing to push for industry-wide safety and driver improvement programs that reallywork.

MEGASAFE PROGRAM PROMOTES TRUCKING SAFETY: MEGASafe, a training program developed by a trucking industry task force, is now being marketed nationally to promote trucking safety. Its sponsors offer it as a significant training program to reduce trucking-related accidents and save money by reducing or stabilizing insurance rates. Ten modules are offered covering such topics as vehicle inspection, driver selection and evaluation, and management's role in safety. Other topics included are hazardous materials handling, drug screening and driver health, both city and over-the-road driving, and security. Each training module uses videotapes and printed materials as well as other media, Business Insurance reports. Now being marketed through state and national trucking associations, MEGASafe is apparently proving to be an effective training tool. Though it has a strong focus on driver safety, it also includes such management concerns as safety audits and compliance with DOT requirements. Costs are estimated at from $50 to $250 per driver annually. Most of the initial endorsements of MEGASafe have come from trucking executives, while insurers have adopted a "wait-and-see" attitude. Any widespread improvement in trucking safety, however, should eventually be reflected in low rates. MEGASafe can be reached at 1-800-522-MEGA.

STANDARDS SOUGHT FOR DRIVER TRAINING: With demands for drivers rising, opportunities were never better for entry-level applicants seeking jobs with top motor carriers. This driver shortage, however, is bringing driver training schools under more scrutiny. A number of trucking executives dismiss some truck driving schools as fast-buck diploma mills whose graduates just can't handle real rigs in traffic. The established training schools seek to counter this image by forming into an accredited group. There's also a push to develop more effective formal training and to require that all truck driving schools meet national standards and requirements. One likely scenario is that training standards proposed by the old Bureau of Motor Carrier Safety will be adopted with federal enforcement. These guidelines would shake out the fly-by-night schools and give the qualified schools a common set of benchmark standards. A few carriers are setting up their own in-house training programs to work in cooperation with schools. Some trucking executives feel that public, community, and technical colleges may offer the best hope for driver training. What's certain is that both the industry and the public want a higher level of driver professionalism. Though sparked by concern over highway safety, this focus should give the industry the standard training methods it's needed rightalong.

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