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Motor CarriersMotor Carriers
Intercity Trucking Ton-Miles
Intercity Trucking Tons
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.
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
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.
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)
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
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.
US Distribution of Motor Carriers
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.
Industry Structure
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
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 (600 miles @ 50 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.
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
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)
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)
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.
Types of Vehicles
• Special Vehicles– Dry Van
• 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
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
Equipment Types
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.
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.
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.
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.
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 130.2 cents per mile (70% of which was variable costs
Cost of Operating a Tractor-Trailer, 1995
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.
Fuel• 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)
Federal Highway Trust Fund Tax Rates
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.
Operation Ratio
Operation Ratio =
Operating expensesOperating revenues
X 100