1. Motor Carriers

2. Intercity Trucking Ton-Miles

3. Intercity Trucking Tons

4. Significance of the Industry
2.4 million jobs in 1998
Average compensation = $ 37,036
Trucks logged 353 billion miles for business purposes (does NOT include government and farm)
US paid over $120 billion for highway transportation (1998) – 86% of the nation’s total freight bill.

5. Types of Motor Carriers
For-hire
Provides services to the public & charges a fee for the service
Local vs. Intercity Operators
Local carriers pick up & deliver freight within the commercial zone of a city
Intercity carriers operate between specifically defined commercial zones.
The two often work in conjunction

6. Types of Motor Carriers
Private Carriers
Provides a service to the industry or a company that owns or leases the vehicles, but does not charge a fee.
May transport commodities for-hire
In this capacity, the private carrier is really an exempt for-hire carrier.

7. Types of Motor Carriers
Exempt Carriers
Specifically exempt from economic regulation
Gains this status by
Type of commodity hauled (I.e., agricultural commodities)
Nature of its operations (incidental to air transportation)

8. Types of Motor Carriers
Common Carriers
Required to serve the general public upon demand, at reasonable rates, & without discrimination.
Contract Carriers
Service specific shippers with whom the carriers have a continuing contract.
Thus, typically not available for public use

9. Types of Motor Carriers
Truckload (TL) Carriers
Provide service to shippers who tender sufficient volume to meet the minimum weights required for a full truckload shipment and TL rate (or who will pay the required amount).
Less-than-Truckload (LTL) Carriers
Provide service to shippers who tender shipments lower than minimum truckload quantities, such as 50 to 10,000 lbs.
Consolidate numerous smaller shipments into TL quantities for Intercity transport
Disaggregate TL shipments at destination for delivery in smaller quantities.

10. US Distribution of Motor Carriers

11. Number of Carriers
458,634 interstate motor carriers were on file with the Office of Motor Carriers in 1998.
70% operate with 6 or fewer trucks.
Does not include private fleets.

12. Industry Structure

13. General Service Characteristics
Offers highest Accessibility of any mode
Can serve virtually any location
Not constrained by waterways, rail tracks, or airport locations
Almost every shipping & receiving locations is accessible via highways

14. General Service Characteristics
Speed
For loads traveling less than 500 miles, usually can deliver in less time than any other mode
Even over 500 miles, can be, in the right situation, faster than air
For example, shipment traveling 600 miles
Truck = 12 hours ( mph)
Air could take up to 24 hours
Flight time = 1 ½ hours
3 hours needed for pickup and another 3 for delivery
If only 1 flight per day is scheduled, shipment might have to wait 24 hours before it lifts off.

15. General Service Characteristics
Cargo-Carrying Capacity
Though smaller than many other modes, shippers can enjoy the TL rate (volume discount) with a lower volume.
Most TL minimums set at 20,000 – 30,000 lbs
Rail carload minimums are often set at 40,000 – 60,000 lbs.
Barge (water) minimums are set in terms of hundreds of tons
Smaller shipping size provides buyers and sellers with
Lower inventory levels
Lower inventory-carry costs
More frequent services

16. General Service Characteristics
Smoothness of Transport
Given the suspension system and pneumatic tires used on trucks, motor carriers offer smoother rides than rail or water
Results in less damage to the cargo (though some does occur)
Less damage results in reduced packaging requirements and thus packaging costs
Customer Focus
By it’s very nature, the industry tends to be more customer- or marketing-oriented
Due in large part to the small size of most carriers (must offer higher service to compete)

17. Types of Vehicles Line-Haul Trucks
Tractor-trailer combination of 3 or more axles
Capacity depends on size (length) and state maximum weight limits
Most states now allow tractor-trailer combos with 5 axles that can haul a maximum of 80,000 lbs gross weight (110,000 in Michigan)
Most vehicles weigh (empty) 30,000 lbs, leaving a maximum net payload of 50,000 lbs or 25 tons.
Anything over 5 axles generally requires a special permit
Capacity is also affected by the density of the freight
A 53’ x 8’ x 8’ trailer has 3,392 cubic feet of space
If the commodity hauled has a density of 10 lbs per cubic foot, the maximum payload for the vehicle would be 33,920 (3,392 cubic feet x 10 lbs./cubic foot)

18. Types of Vehicles City Trucks
Normally smaller than line-haulers and are single units
Typically 20 to 25 feet long with a cargo unit 15 to 20 feet long.
There is growing use of small trailers that are 20 to 28 feet long.

19. Types of Vehicles Special Vehicles Dry Van Open Top Flatbed
Standard trailer or straight truck with all sides enclosed
Open Top
Trailer top is open to permit loading of odd-sized freight through the top
Flatbed
Trailer has no top or sides; used extensively to haul steel, lumber, etc.
Tank Trailer
Cylinder trailer used to haul liquids

20. Types of Vehicles Special Vehicles Refrigerated Trailers (Reefers)
Cargo unit with controlled temperatures
High Cube Trailer
Cargo unit has drop-frame design or is higher than normal to increase cubic capacity
Special
Vehicle with a unique design to haul a special commodity; such as liquefied gas or automobiles

21. Equipment Types

22. Terminals Pickup and Delivery (PUD) Terminals
Freight is collected from shippers and brought to the PUD terminal where it is consolidated with other loads going in the same direction or to the same destination.
Consolidated shipments loaded onto a line-hauler for transport to the destination terminal.
At the destination terminal, line-hauler is emptied, and the combined shipments are separated and reloaded unto city trucks. City trucks then deliver the shipments to the ultimate consignee.

23. Terminals Pickup and Delivery (PUD) Terminals PUDs are also used for
Sales, billing, and claim handling
Limited vehicle maintenance
Change freight from one carrier to another
PUDs are also called end-of-line terminals.

24. Terminals Break-Bulk Terminals
Basic function is the separation of combined shipments
Freight is unloaded from consolidated truckloads, sorted by destination, and reloaded for dispatch to destination.
Generally, break-bulk terminals are centrally located within the carrier’s operating scope and at the junction of major east-west and north-south highways. Provides greater efficiency.

25. Terminals Relay Terminals
Unlike PUDs and Break-Bulk terminals, the freight is never touched at a relay terminal.
Necessitated by the maximum hours-of-service regulation that is imposed on drivers.
10 hours maximum driving after 8 consecutive hours off-duty.
At the relay terminal, one driver substitutes for another (hence, the term slip seat that is also used for relay terminals)
Relay terminals are normally located within a maximum of 10 hours driving time from the point of origin.
Alternative to the relay terminal is the sleeper team – 2 drivers.

26. Cost Structure
Approximately 70 to 90 % of motor carrier costs are variable.
Allows the carrier to increase/decrease the number of vehicles used in short periods of time and in small increments of capacity.
Low fixed costs due to
Public financing of the highway system
Terminals are less expensive than those used by other modes
Bulk of the carrier’s cost is associated with daily operating costs – fuel, wages, & maintenance
In 1995, average total cost to operate a tractor-trailer was cents per mile (70% of which was variable costs

27. Cost of Operating a Tractor-Trailer, 1995

28. Labor Accounts for 29% of total costs per vehicle mile
Usually absorb about 50% of a carrier’s revenue dollar.
Average annual wage (1997) was $37,036
Average hourly compensation was $12.83
Typical over-the-road driver paid 32.5 cents per mile
Local drivers paid by the hour
Driving Time Regulations (USDOT)
15 hours on-duty after 8 hours off-duty
10 hours driving after 8 hours off-duty
Cannot accumulate more than 60 hours on-duty in 7 consecutive days, or 70 in 8.

29. Fuel Fuel Taxes 130% increase in diesel fuel prices from 1976 to 1985
1976: 11.6 cents/mile (19.8% of total cost/mile)
1985: 24.6 cents/mile (21.1% of total cost/mile)
1995: 19.2 cents/mile (14.7% of total cost/mile)
Fuel Taxes
Primary reason for growth in fuel costs
Motor carrier industry paid $23.8 billion in federal and state highway user taxes in 1995
Federal Fuel Tax is 24.3 cents per gallon
States tack on anywhere from 2 cents to 24.5 cents per gallon
Thus, total tax on a gallon can be as high as 48.8 cents (out of average total cost of $1.10/gallon)

30. Federal Highway Trust Fund Tax Rates

31. Operation Ratio
Measure of operating efficiency used by motor carriers.
Function of operating expenses and operating revenues
Operating expenses are those expenses directly associated with the transportation of freight, excluding non-transportation expenses and interest costs.
Operating revenues are the total operating revenues generated from freight transportation services.
The closer the ratio is to 100, the more indicative of the possible need to raise rates to increase total revenues.
For example, an operation ratio of 94 means that 94 cents of every operating revenue dollar is consumed by operating expenses.
This only leaves 6 cents to cover interest costs and provide a return to the owners.
Operation ratio for most motor carriers generally range between 93 and 96.

32. Operation Ratio Operating expenses Operation Ratio = X 100
Operating revenues