May 16, 2005
Keep on truckin' | Palermo-based ET Transportation helps truckers find freight, and vice versa
By Jeffrey Bouley
If you see a semi truck cab barreling down the interstate with no trailer trailing behind it, chances are good that you are looking at an unhappy trucker. Ditto if you see an empty flatbed or, if you have X-ray vision, look into a box truck or commercial cargo van without any cargo.
Because unless those trucks just got onto the interstate from their home base ˆ en route to a customer for whom they will be carrying cargo ˆ they hauled cargo on an outbound trip, but had no goods to carry back home. And that means wasted time, wasted fuel and lost potential.
Generally speaking, truckers want to be hauling freight on both legs of any given trip. But unless a customer needs them for a rare round-trip haul, truckers are in a bit of a quandary. After all, it's not like they can just shout out at their destination, "Anyone have a load that's going back to my state?"
This is where third-party logistics companies ˆ a term for freight brokers ˆ come into play. One of the things they do, in addition to connecting customers with available trucks to haul cargo, is to help ensure that carriers' trucks are loaded in both directions, even if it's not the same customer for both trips.
Palermo-based ET Transportation Services got its start 17 years ago that way, trying to help truckers in Maine stop wasting their time on the road with empty trucks. Later, it became just as important to search throughout New England and beyond to help companies find trucks to haul their cargo and to find customers for the truckers.
"We don't own any of our own trucks," says Stan York, ET Transportation's vice president. "Customers call us and want freight moved from point A to point B, and we find the equipment to do that. We stay on the phones all day long with the time-consuming work of calling carriers and finding the vehicles, so that companies don't have to waste their time doing that. At the same time, we're calling trucking companies all the time to find out where they want to go to deliver cargo and trying to find cargo for them on their return trips."
In addition, ET Transportation arranges pickup and delivery appointments, confirms that carriers have the proper insurance and handles other minutiae of the carrier-customer transaction.
York says that ET has garnered a reputation for reliability, which helped the company shift its business beyond New England's borders almost a decade ago. "About 80% of our business now is bringing carriers into New England, whether that is for companies that need freight delivered from other states or for carriers who are looking for freight they can carry as they return home to New England after making deliveries elsewhere," York says.
Despite that success, ET now faces challenges of demand increasingly out of pace with the supply of trucks, increased competition and the specter of federal legislation on fuel surcharges that could put the company ˆ and others like it ˆ in a financial bind.
Supply and demand
On the face of it, the increasing demand for freight shipping seems to indicate a bright future for trucking and other modes of transport, such as rail and water. According to the U.S. Department of Transportation, the nation's transportation system annually will handle cargo valued at almost $30 trillion by 2020, compared with $9 trillion in 2003. Also, cargo volumes by 2020 are expected to increase by almost 70% over the 2003 level of 15 billion tons.
Third-party logistics companies ˆ the freight brokers ˆ will almost certainly see business increase as a result, according to Robert Voltmann, president and CEO of the Transportation Intermediaries Association in Alexandria, Va., of which ET Transportation has been a member since 1997. "In addition, a recent J.P. Morgan study indicated that third-party logistics companies will grow at 24% to 29% per year for the next five years," Voltmann says.
But according to ET Transportation's president, Tom Pilsbury, those figures belie a fundamental problem: a shortage of trucks. "There are a tremendous amount of carriers who own between five and 10 trucks that we've seen fold up," Pilsbury says. "In recent years, more than 16,000 of them went out of business, and that's a lot of equipment off the road."
As the smaller operations go out of business, the bigger ones get bigger, Pilsbury says, but he maintains that the growth of larger carriers still doesn't keep up with the current demand. And, from a personal standpoint, Pilsbury hates to see the "mom and pop" carriers go belly up only to watch what he calls the "Wal-Marts of the trucking world" add 50 to 100 trucks at a time to their fleets.
"We try to help out the smaller trucking companies. We know how hard it is with fuel and insurance and such," York says. "We don't ignore the bigger trucking companies ˆ we couldn't do that and still meet the freight-hauling needs of many customers ˆ but we do try to focus on the smaller operations wherever and whenever we can."
Another burden, particularly since late last year, has been rising fuel prices. "Right now is a tough time for trucking with the fuel prices we've been through over the last six months. They have really raised havoc," says Dale Hanington, president and CEO of the Maine Motor Transport Association in Augusta. "When fuel prices go up, smaller companies have a tough time of it. You see a lot of bankruptcies right now, a lot of struggling companies and a lot of competitiveness."
The freight broker is often in a delicate position when prices go up. In the vast majority of arrangements, whether the broker is finding trucks for a company or finding a company for an empty truck, the company with goods that need to be hauled pays the broker an agreed-upon fee. The broker pays the carrier (whether a big trucking company or a smaller owner-operator) out of that fee, and keeps whatever is left over. The challenge for the broker is setting fees high enough to make a profit after paying the carrier ˆ without setting them so high that the customer will find its own truckers.
Fuel for thought
Fuel prices have led to another potential problem for trucking and for brokers like ET Transportation, because now the federal government wants to get into the game. Or, rather, back into the game.
In March, the U.S. House of Representatives passed a highway bill known as HR 3. Section 4139 of the bill requires that carriers, shippers and intermediaries such as brokers pay a minimum fuel surcharge, set by the government, to the person who pays for the fuel they use.
York sees this as a step backward, because it re-regulates an industry that was deregulated long ago ˆ and that he says works fine without federal interference. "Fuel price increases are a challenge, I admit," York says. "[Carriers are] used to paying certain freight rates for a number of years, and then they see costs creeping up and up and up. You have to walk a fine line when you ask people to pay more."
But as tricky as the process can get, York says federal legislation is absolutely not the way to go. Fuel prices vary across the country, he says, and although ET Transportation consults national averages to adjust carriers' fees as needed, the company doesn't stick to a one-size-fits-all approach.
"We try to convince customers when necessary to increase rates by so many cents per mile to cover increased fuel costs for carriers," York says. "Some agree, and some don't. Some come back to us with counter-proposals that are higher than what they paid before but lower than what we think they should be. As messy as that can be, it works, because you're negotiating with people and taking into account individual situations when you have to. It would be horrific to make one standard figure across the country for fuel surcharges."
According to York, in addition to taking too much control out of the hands of trucking companies, customers and brokers, federal legislation could open up a Pandora's box of potential litigation (see "Feds and fuel," below).
Staying competitive
On top of supply-and-demand issues and increasing trucking costs, one other major hurdle remains to ET Transportation: keeping ahead of the competition. "I can remember when there were only four brokers in Maine. Now, I don't even know how many there are," Pilsbury says. "Not only do we have competition from more brokers, but there are also big trucking companies out there who cut out the brokers and go directly to customers to cut freight-hauling deals."
When possible, ET makes agreements with the larger trucking companies it uses, so they don't step on each other's toes in certain geographical areas. But there are also companies that, as Pilsbury says, "want the whole pie."
In the midst of such challenges, how has ET Transportation continued to survive ˆ and how will it continue to grow? According to Pilsbury and York, the answer is simple: customer service.
"Service is what we have to offer. That's our main key," Pilsbury says. "If we didn't have high-quality customer service, we couldn't run this business as successfully as we do."
Cascades Auburn Fiber, a waste paper recycling company in Auburn, is one of the customers that appreciates that attention, using ET Transportation to arrange nearly a third of its inbound freight. "Normally, we wouldn't use a broker as much as we do because so many Maine truckers who are looking to come back to Maine with cargo call me directly," says Sharon Lacy, logistics manager for Cascades. "But ET's level of service is so outstanding that they are only broker we use on inbound."
Both Pilsbury and York see a positive future for ET Transportation, regardless of the challenges ahead. The firm recently moved into a new office building, and York received certified transportation broker status from the Transportation Intermediaries Association. Pilsbury notes that York was one of the first two people in Maine to achieve this status.
"You don't need to be certified to run a brokerage, but it shows a level of commitment and proves to people that you're in it for the long haul, and not as some lark," York explains. "It also helps show that your company is serious about its work and that you aren't just going to disappear after you've made a quick buck, like some brokers do. Tom has been in the industry for years, so people know he's not going away, but it's important for them to know that the company overall is going to stick around and be there for them. As long as they see that, and we continue to deliver on our promises, we will continue to see plenty of business."
Because unless those trucks just got onto the interstate from their home base ˆ en route to a customer for whom they will be carrying cargo ˆ they hauled cargo on an outbound trip, but had no goods to carry back home. And that means wasted time, wasted fuel and lost potential.
Generally speaking, truckers want to be hauling freight on both legs of any given trip. But unless a customer needs them for a rare round-trip haul, truckers are in a bit of a quandary. After all, it's not like they can just shout out at their destination, "Anyone have a load that's going back to my state?"
This is where third-party logistics companies ˆ a term for freight brokers ˆ come into play. One of the things they do, in addition to connecting customers with available trucks to haul cargo, is to help ensure that carriers' trucks are loaded in both directions, even if it's not the same customer for both trips.
Palermo-based ET Transportation Services got its start 17 years ago that way, trying to help truckers in Maine stop wasting their time on the road with empty trucks. Later, it became just as important to search throughout New England and beyond to help companies find trucks to haul their cargo and to find customers for the truckers.
"We don't own any of our own trucks," says Stan York, ET Transportation's vice president. "Customers call us and want freight moved from point A to point B, and we find the equipment to do that. We stay on the phones all day long with the time-consuming work of calling carriers and finding the vehicles, so that companies don't have to waste their time doing that. At the same time, we're calling trucking companies all the time to find out where they want to go to deliver cargo and trying to find cargo for them on their return trips."
In addition, ET Transportation arranges pickup and delivery appointments, confirms that carriers have the proper insurance and handles other minutiae of the carrier-customer transaction.
York says that ET has garnered a reputation for reliability, which helped the company shift its business beyond New England's borders almost a decade ago. "About 80% of our business now is bringing carriers into New England, whether that is for companies that need freight delivered from other states or for carriers who are looking for freight they can carry as they return home to New England after making deliveries elsewhere," York says.
Despite that success, ET now faces challenges of demand increasingly out of pace with the supply of trucks, increased competition and the specter of federal legislation on fuel surcharges that could put the company ˆ and others like it ˆ in a financial bind.
Supply and demand
On the face of it, the increasing demand for freight shipping seems to indicate a bright future for trucking and other modes of transport, such as rail and water. According to the U.S. Department of Transportation, the nation's transportation system annually will handle cargo valued at almost $30 trillion by 2020, compared with $9 trillion in 2003. Also, cargo volumes by 2020 are expected to increase by almost 70% over the 2003 level of 15 billion tons.
Third-party logistics companies ˆ the freight brokers ˆ will almost certainly see business increase as a result, according to Robert Voltmann, president and CEO of the Transportation Intermediaries Association in Alexandria, Va., of which ET Transportation has been a member since 1997. "In addition, a recent J.P. Morgan study indicated that third-party logistics companies will grow at 24% to 29% per year for the next five years," Voltmann says.
But according to ET Transportation's president, Tom Pilsbury, those figures belie a fundamental problem: a shortage of trucks. "There are a tremendous amount of carriers who own between five and 10 trucks that we've seen fold up," Pilsbury says. "In recent years, more than 16,000 of them went out of business, and that's a lot of equipment off the road."
As the smaller operations go out of business, the bigger ones get bigger, Pilsbury says, but he maintains that the growth of larger carriers still doesn't keep up with the current demand. And, from a personal standpoint, Pilsbury hates to see the "mom and pop" carriers go belly up only to watch what he calls the "Wal-Marts of the trucking world" add 50 to 100 trucks at a time to their fleets.
"We try to help out the smaller trucking companies. We know how hard it is with fuel and insurance and such," York says. "We don't ignore the bigger trucking companies ˆ we couldn't do that and still meet the freight-hauling needs of many customers ˆ but we do try to focus on the smaller operations wherever and whenever we can."
Another burden, particularly since late last year, has been rising fuel prices. "Right now is a tough time for trucking with the fuel prices we've been through over the last six months. They have really raised havoc," says Dale Hanington, president and CEO of the Maine Motor Transport Association in Augusta. "When fuel prices go up, smaller companies have a tough time of it. You see a lot of bankruptcies right now, a lot of struggling companies and a lot of competitiveness."
The freight broker is often in a delicate position when prices go up. In the vast majority of arrangements, whether the broker is finding trucks for a company or finding a company for an empty truck, the company with goods that need to be hauled pays the broker an agreed-upon fee. The broker pays the carrier (whether a big trucking company or a smaller owner-operator) out of that fee, and keeps whatever is left over. The challenge for the broker is setting fees high enough to make a profit after paying the carrier ˆ without setting them so high that the customer will find its own truckers.
Fuel for thought
Fuel prices have led to another potential problem for trucking and for brokers like ET Transportation, because now the federal government wants to get into the game. Or, rather, back into the game.
In March, the U.S. House of Representatives passed a highway bill known as HR 3. Section 4139 of the bill requires that carriers, shippers and intermediaries such as brokers pay a minimum fuel surcharge, set by the government, to the person who pays for the fuel they use.
York sees this as a step backward, because it re-regulates an industry that was deregulated long ago ˆ and that he says works fine without federal interference. "Fuel price increases are a challenge, I admit," York says. "[Carriers are] used to paying certain freight rates for a number of years, and then they see costs creeping up and up and up. You have to walk a fine line when you ask people to pay more."
But as tricky as the process can get, York says federal legislation is absolutely not the way to go. Fuel prices vary across the country, he says, and although ET Transportation consults national averages to adjust carriers' fees as needed, the company doesn't stick to a one-size-fits-all approach.
"We try to convince customers when necessary to increase rates by so many cents per mile to cover increased fuel costs for carriers," York says. "Some agree, and some don't. Some come back to us with counter-proposals that are higher than what they paid before but lower than what we think they should be. As messy as that can be, it works, because you're negotiating with people and taking into account individual situations when you have to. It would be horrific to make one standard figure across the country for fuel surcharges."
According to York, in addition to taking too much control out of the hands of trucking companies, customers and brokers, federal legislation could open up a Pandora's box of potential litigation (see "Feds and fuel," below).
Staying competitive
On top of supply-and-demand issues and increasing trucking costs, one other major hurdle remains to ET Transportation: keeping ahead of the competition. "I can remember when there were only four brokers in Maine. Now, I don't even know how many there are," Pilsbury says. "Not only do we have competition from more brokers, but there are also big trucking companies out there who cut out the brokers and go directly to customers to cut freight-hauling deals."
When possible, ET makes agreements with the larger trucking companies it uses, so they don't step on each other's toes in certain geographical areas. But there are also companies that, as Pilsbury says, "want the whole pie."
In the midst of such challenges, how has ET Transportation continued to survive ˆ and how will it continue to grow? According to Pilsbury and York, the answer is simple: customer service.
"Service is what we have to offer. That's our main key," Pilsbury says. "If we didn't have high-quality customer service, we couldn't run this business as successfully as we do."
Cascades Auburn Fiber, a waste paper recycling company in Auburn, is one of the customers that appreciates that attention, using ET Transportation to arrange nearly a third of its inbound freight. "Normally, we wouldn't use a broker as much as we do because so many Maine truckers who are looking to come back to Maine with cargo call me directly," says Sharon Lacy, logistics manager for Cascades. "But ET's level of service is so outstanding that they are only broker we use on inbound."
Both Pilsbury and York see a positive future for ET Transportation, regardless of the challenges ahead. The firm recently moved into a new office building, and York received certified transportation broker status from the Transportation Intermediaries Association. Pilsbury notes that York was one of the first two people in Maine to achieve this status.
"You don't need to be certified to run a brokerage, but it shows a level of commitment and proves to people that you're in it for the long haul, and not as some lark," York explains. "It also helps show that your company is serious about its work and that you aren't just going to disappear after you've made a quick buck, like some brokers do. Tom has been in the industry for years, so people know he's not going away, but it's important for them to know that the company overall is going to stick around and be there for them. As long as they see that, and we continue to deliver on our promises, we will continue to see plenty of business."
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