Ken Kellaway Jr., RoadOne’s CEO and a veteran of the drayage industry, recently produced a report “State of the Union in the Drayage Industry” which points the way for a much needed overhaul.
\Ken Kellaway Jr. has been involved all his life in the drayage industry. His current position is founder and CEO of RoadOne, one of the largest and most innovative companies in the drayage business in North America. However, Kellaway is also a student of the industry and worried about the future.
The drayage industry is under siege from all sides, and Kellaway, in an effort as much to educate the wider shipping public as to outline a plan of action, produced a succinct report, the “State of the Union in the Drayage Industry.”
In an interview with the AJOT, Kellaway outlined some of the challenges to the dray business. In a sense, the drayage industry is the forgotten and forlorn step-child of the container revolution. While container ships and terminals get all the ink, the drivers, rigs and chassis (see Matt Miller story on chassis pools on page 2) that perform the essential service moving the ocean containers in and out of the facilities rarely get mentioned, unless they are late, or goods are damaged.
A Problem State
“There’s a driver shortage and this will squeeze [intermodal] capacity,” Kellaway explained. The shortage comes from a variety of reasons. One is regulatory as the FMCSA (Federal Motor Safety Carrier Administration) HOS (hours of service) rules take effect. Kellaway estimates that the HOS will shrink intermodal capacity 3%-5%. Another factor is an aging population of drivers. Kellaway says, “The new generation [that would have in the past filled the ranks of drivers] thinks driving is under paid when compared to being a plumber or the construction trades.” He says that recruiting applications for drivers are off 20%-25%.
Another reason that figures heavily into the drayage industry’s over all performance is congestion. Not only must the drivers navigate some of the nation’s most densely trafficked highways, the real turn times at many container terminals is in many cases horrendous. As one drayage company owner explained, truck drivers are often sitting for hours outside the gates. The drivers can’t leave, or they’ll lose their place in line. There are no restroom facilities or places to get food. The trucks idle and burn expensive fuel, hardly an inspiring career opportunity. Even those drivers that wish to stay in the industry are likely to move sideways to domestic intermodal where higher rates, longer gate hours, better load factors (head hauls and back hauls) and newer equipment provide a real contrast to drayage.
Added to this is the problem of the trucks themselves. Drayage is a “highly fragmented” industry, and many of the trucks are owner-operated. As they are financially squeezed, so is the maintenance of the rigs. Recapped tires become the norm rather than new, and inevitably there are increased delays associated with flat tires and road trouble.
The drayage industry is being environmentally challenged. There is a move to get emissions down by using more environmentally friendly, yet more expensive rigs. This is just another price point cutting into freight rates that haven’t kept up with even the cost of living, never mind the demands of the intermodal sector. Diesel fuel costs per gallon in 2010, a mere four years ago, started the first quarter around $2.75 a gallon and pretty much since 2011 have been $3.75 to $4.00 ever since. Another difficult cost increase to pass on to another party. When the profit margins on a business start falling to a half a percent there simply isn’t enough to sustain a reasonable service level. Kellaway says, “We [drayage operators] can’t grow in sync with the capital costs made by rail, the terminal operators or the steamship lines at the present level.
In for the Long Haul
Kellaway sees the tremendous amount of business right around the corner. The rapid increase in the size of the box-ships calling in North America, especially on the US East Coast, and the general increase in international trade, means there will be more demand for drayed moves. Unless there is more money directed at the dray component of the intermodal equation, truck service will bog down. As Kellaway says, “there is no bad freight, just bad rates.”
For Kellaway, drayage survival isn’t just about increasing rates but also industry wide solutions such as some industry standard solutions to the chassis problem (see Matt Miller story on page 2). Solutions need to address velocity throughout the system with more night gates, drops at destinations, and reduced port/ramp turn times. He advocates a stronger partnership with the customers, and when third parties are involved bringing them into the process and pricing. Along those lines, Kellaway also believes that if a shipper or third party wants value added services, they should, or the third party should, pay additional costs.
Finally, one of Kellaway’s biggest grievances is that historically draymen have not had “a seat at the table,” when trade groups discuss the issues impacting the movement of containerized freight. He wants that to change, and maybe his “State of the Union in the Drayage Industry” will help the rest of the industry get up to speed.