Motor 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 customeror 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
Operating expenses
Operation Ratio =
Operating revenues
X 100