The document discusses increased freight volumes across all transportation modes including rail, trucking, air and shipping. This has led to tight capacity and higher rates. Shippers are seeking more visibility and closer partnerships with carriers to manage costs. Inventories are also down, leading to more frequent smaller shipments. The driver shortage continues to be a major problem exacerbated by higher volumes. Carriers are pursuing various strategies to attract more drivers including improving pay and conditions. Technology adoption is increasing but many small carriers lack resources for investment. Relationships between shippers and carriers need focus on continuous collaboration to drive efficiencies.

1. Transportation Peer Group
June 5, 2018
The railroads are experiencing increased volumes across-the-board—even coal.
Due to the higher volumes, drayage of intermodal equipment has become very tight. To
obtain service, shippers have been focusing on becoming the “shipper of choice” by
turning equipment faster and working with their carriers and customers to provide more
visibility. The following chart from the American Association of Railroads’ Rail Time
Indicators reflects the increased volumes experience by rail. The chart reflects a six-
week moving average of weekly rail car volumes.
The increased volumes experienced in the motor carrier segment is reflected in
the weekly load-to-truck ratio as reported on the DAT Trendlines website:
-
20.0
40.0
60.0
80.0
100.0
120.0
Van Reefer Flatbed

2. The ATA truck tonnage index also reflects a strong increase in freight demand:
Increased visibility in the supply chain was a consistent comment. The focus has
shifted from pricing to planning and managing drivers and equipment. Customers are
seeking more visibility in their upstream supply chain. The ELD mandate has put a
“spotlight” on equipment utilization to keep costs down and meet customer service
objectives.
Increased freight volumes have produced the situation of a perfect storm.
Comments were that it is rare that everything [freight and commodities] goes up at the
same time (rail, trucking, air, expedited, international). Tight capacity is resulting in
increased rates. As a result, shippers are seeking to work more closely with their
carriers to determine how to best manage costs.
The inventory drawdown has been compounding the problem (see below). The
reduction in inventory levels has resulted in smaller, more frequent shipments for
replenishment generating additional parcel, LTL, and expedited shipments.
85.0
90.0
95.0
100.0
105.0
110.0
115.0
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
Apr 2018
ATA: 112.5
+9.5% YOY

3. Source: US Census Bureau
Increased freight volumes have accentuated the underlying driver shortage
problem. Several individuals commented that they interview several hundred
candidates to obtain only a very small proportion of qualified drivers or applicants for
driving schools. The driver shortage is reflected in the driver turnover rate reported by
the American Trucking Association:
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Jan-2006
Jun-2006
Nov-2006
Apr-2007
Sep-2007
Feb-2008
Jul-2008
Dec-2008
May-2009
Oct-2009
Mar-2010
Aug-2010
Jan-2011
Jun-2011
Nov-2011
Apr-2012
Sep-2012
Feb-2013
Jul-2013
Dec-2013
May-2014
Oct-2014
Mar-2015
Aug-2015
Jan-2016
Jun-2016
Nov-2016
Apr-2017
Sep-2017
Feb-2018
Retail Ratio
Manufacturer Ratio
Wholesale Ratio
0%
20%
40%
60%
80%
100%
120%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018
Percent
Large TL Fleets Small TL Feets LTL Fleets

4. Several strategies were mentioned as possible solutions to the driver shortage
problem. These included truck platooning, getting drivers home at night, better
treatment for drivers, reducing the age for a CDL to 18 years, using longer combination
vehicles, and one individual mentioned that they were actively converting warehouse
personnel to become truck drivers. Others were using “couriers for hire” for local
deliveries. The opening of internal driving schools was another option identified. Areas
for potential improvement include determining how to incentivize drivers to enter the
industry earlier—30 year olds are the average entry; and identifying opportunities to
partner/share loads across multiple transportation modes.
Uber/Lyft not viewed as a viable option. Reliability is essential in most
operations, and an operation cannot just hope somebody will show up to make a
delivery.
Despite the tight capacity, one estimate indicated that up to 20% of the trucking
capacity is moving empty, usually on backhauls. The use of technology can lead to
greater efficiencies; however, a large number of small carriers (94% of trucking
companies operate six or fewer tractors) and lack the ability to make the investment in
information technology. One participant mentioned that the LTL industry did not
traditionally invest in technology which has affected the ability to track these shipments.
However, the increased need for visibility may force some changes.
One point raised as an obstacle to increasing capacity utilization is that most
shippers do not want to share their data. The lack of sharing precludes carriers from
effectively pooling their equipment across customers or lanes.
Strategies for addressing peak season were discussed. These included:
 Ensure locations are “carrier friendly:
 Focus on change management to make operations more efficient
 Adopt a service management approach—some carriers are scoring pickup and
delivery locations and factoring into their evaluation of loads
 Move away from a transactional approach to moving freight
Carriers are seeing greater interest in dedicated as shippers want to ensure
equipment availability.
The rail industry has taken several actions to increase its capacity to handle
additional freight volumes. These include:
 Investment in infrastructure—parallel tracks
 Information technology enabling the railroads to have closer, “drafting,” trains
 Purchasing additional locomotives
 Building longer trains, some up to three miles long

5.  Better yard management—working with major shippers and trucking companies
to better allocate/stage freight
 Maintaining flexibility—comments made that industry prefers “open gates” as
opposed to appointments
The LTL industry is moving away from the classification system to dimensional
pricing. The traditional system based pricing too much on assumptions regarding the
mix of freight which often change.
Closing discussion focused on the point that relationship management is just as
important today as information technology. Several carrier representatives remarked
“Shippers want to partner when rates go up,” but when rates go down, much less focus
on collaboration when rates go down. One shipper indicated that they do attempt to
work with their carriers. In some instances, the carriers share the operating ratio on
their business; however, others have significant distrust. During quarterly business
reviews between shippers and carriers, the focus needs to be on how to jointly drive
continuous improvement.
Transportation Peer Group
June 6, 2018
The opening discussion focused on sustainability and changes in trucking
technology.
Focus on sustainability based more on core values than as a specific strategy to
obtain customers or drive down costs. One of the railroads mentioned that they provide
sustainability information regarding their train movements through the use of a “carbon
calculator.”
One carrier indicated that CNG has not worked due to weight and fill time. They
are exploring LNG and have seen a reduction in fuel costs. The focus on using natural
gas has been a part of their core values to become more sustainable.
Electronic logging devices have assisted with reducing fuel consumption.
Telematics has enabled the tracking of idle time. They have seen average idle time
reduced from one hour to less than 15 minutes.
Autonomous vehicles still perceived as being several years away. However, as
they become deployed they will be justified based on increasing safety and labor
productivity.
Electric vehicles seen as likely increasing in number as the range increases and
vehicle weight decreases.

6. Last mile discussion:
 Carriers/3PLs providing last mile delivery expected to provide same tracking
capability and delivery timeframes as small parcel
 Seeing a shift away from white glove delivery to lower cost alternatives such as
curbside delivery
 Carriers being evaluated on customer scores
 Productivity has changed for last mile carriers—white glove deliveries and ELD
implementation have reduced productivity
Blockchain discussion:
 Question raised as to how to exchange information—transportation supports
different industries often using multiple modes and carriers—information
exchanged and needed in a variety of formats. Data needs to be “stitched”
together to obtain the needed information and make decisions.
 Blockchain may be an answer; however, much greater understanding is needed
as to what it is, how it will work, and the types of information that can be
exchanged. The platform does allow financial transactions in a secure
environment, and it does change the game. One individual referred to it, and the
development of other IT capabilities as “an arms race.”
 Block chain does provide information availability, integrity and security.