Consumer Products Companies Can’t Keep on Truckin’

Truck driver shortages, escalating fuel prices and increasing imports have pushed consumer goods manufacturers and retailers towards long-haul trucking alternatives, including rail and short-haul road freight.

Over the past year, as diesel prices rose manufacturers and retailers began considering how to deal with the trucking crisis, such as alternative distribution, says Chris Caplice, principal research associate at the Massachusetts Institute of Technology’s Center for Transportation and Logistics in Boston.

The average price for diesel fuel nationally was $2.928 per gallon on Sept. 30, compared to $2.649 a month earlier and $2.038 a year ago, according to the American Automobile Association. In the four days following the landfall of Hurricane Katrina on August 29, diesel prices rose 35 cents a gallon.

When Hurricanes Katrina and Rita drove up fuel prices to record levels, it accelerated companies’ drive to abandon their reliance on trucking. “Shippers have been looking atthe trucking crisis for years; now it’s worth paying attention to,” Caplice says.

Before fuel prices skyrocketed, the industry already suffered a shortage of about 20,000 long-haul drivers, according to the American Trucking Association. In addition, new laws have reduced drivers’ time spent on the road, making trips longer and more expensive.

Meanwhile, shipping needs are growing at about 3 percent per year. “The percent of workers willing to do any truck driving is shrinking,” says Gary Petty, CEO of the American National Private Truck Counsel in Alexander, Va.

The amount of goods shipped over highways is expected to double over the next 20 years, Petty says; the number of new roads isn’t expected to keep pace.

When it comes to trucking costs, consumer products manufacturers and retailers have limited options. Trucks move about 85 percent of goods within the United States. Many communities don’t have alternatives like commercial railroads and airports to deliver goods. And Petty says that the past decade’s increase of imported goods from China has pushed demand for trucking freight even higher.

Many large retailers such as Wal-Mart Stores and Home Depot have their own trucking fleet, which they supplement with independent drivers who own cabs and trailers. Smaller retailers will hire independent drivers or rely upon manufacturers to deliver goods.

Read the full KPMG article (PDF).

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