Volume 40, Issue 8 August 2005
Dedicated Agreements Led to Industry Transportation Problems
by Charles Cumpston
Ordinarily, we think of dedication as a good thing. But the trend toward dedicated agreements between the primary glass manufacturers and contract shippers is creating hauling problems in the industry.
It all began last year, explained Bob Gouge, director of purchasing and transportation for AFG Industries Inc. in Kingsport, Tenn., when the primary glass manufacturers experienced a lack of the specialized transportation vehicles needed to deliver their products. To be sure the glass manufacturers had trucks to haul their glass when and where they needed them, the solution was to sign dedicated transportation agreements with carriers that guaranteed the primaries would get the equipment they need when they need it and the carriers would get a specific amount of volume or business.
“The industry has moved from over-the-road transportation equipment that’s available to anyone in which the carriers, more or less, managed the efficiency of their equipment, to one where dedicated agreements have reduced the flexibility of the overall transportation fleet,” Gouge says.
Roy Stone, materials manager for Binswanger Mirror in Grenada, Miss., agrees that the dedicated agreements are creating problems for fabricators as well.
“It’s difficult to get the trucks you need to haul the freight,” he says. “More trucks are on the road empty rather than hauling the freight they should.”
Stone says that in the past he would get reliable deliveries from the primaries and then those trucks would be able to haul his product on the return route. But with the dedicated agreements, this is not the case. “Now the trucks turn around and go back empty,” he says.
Gouge says that though the dedicated agreements his company has entered into on a small scale have eased the pressure of having adequate capacity, it has come at a cost. With some carriers, he says, the company has had to pay increased costs just so they [the carriers] can keep up with salary increases for their drivers.
Stone made the point that even with the dedicated agreements, the primaries are having difficulty handling all of their loads. This also affects fabricators.
“We have our own fleets, but we count on outside carriers for overflow because we can’t always man our fleet at peak levels so the dedicated agreements are affecting us,” he states.
Other fabricators are also reporting transportation woes. John Stilwell, vice president of fabrication for AFG Industries Inc. in Kingsport, Tenn., said that high fuel prices are “impacting how we run our routes and how we evaluate how frequently we go.”
“Much of our delivery is on-site and those types of deliveries are not as attractive as picking up a full load of product and delivering it to one stop,” adds Brad Austin, senior vice president of Viracon Inc. in Owatonna, Minn. “You’ve got to coordinate a jobsite delivery and the driver might be stuck off-loading for a longer period of time.”
David Smith, logistics manager for Guardian Glass Corp. in Corsicana, Texas, agrees that the problem touches each level of the industry, manufacturers as well as fabricators. He points out that his company is dealing with the situation by trying to expand its carrier base.
“We’re looking to implement a 3PL (third-party logistics provider),” he explains. “We are trying to partner more with carriers whereby we give the partner companies more of our volume and they give us more of their capacity,” he adds.
According to Smith, Guardian has had some success with this approach, but a driver shortage problem is still throwing a wrench into the works.
“The driver shortage problem is far-reaching and affects all industries,” he states. “And with the cyclical increase in glass demand, there has been more demand for drivers. But the national trucking contract companies can’t get all the drivers they need,” he points out.
“They have trucks sitting idle.”
Barbara Vitchus, vice president and general manager of Schneider Specialized Carriers Inc. in Green Bay, Wis., confirms this, but adds that her company does not have any idle trucks at this time.
“Getting and keeping drivers is extremely difficult,” she says. “It’s a highly skilled, dangerous job with a lot more physical challenges than regular commercial driving. Driving on the highway with an open truck is very different from driving a van,” she points out.
Schneider Specialized Carriers specializes in hauling flat-glass on flatbed and specialized trailers for use in the automotive and commercial construction industries.
Who Wants This Job?
Smith thinks the biggest factor causing the driver shortage is the working conditions.
“It’s not a very desirable job today. People don’t want to be away from home so much. Either [trucking companies] are going to have to change the job conditions or the pay if they want to solve the problem.”
Stone agrees that the driver shortage is definitely a problem.
“It’s a combination of people not wanting the job and people who want the job not being qualified,” he states.
Gouge, too, points out that being able to hire good people is a concern for companies.
According to Smith, detention time is another factor deterring drivers. Because the average wait to load and unload is three hours, the driver has six hours of non-productivity, which is a lot on short hauls, he states. The carriers give a company two free hours for loading and unloading and then they have to pay for the rest of the wait time, he explains.
Gouge agrees that the drivers’ time restrictions have been a factor in the current shortage problem, but not as much as some had feared.
“It has had an impact on truck utilization,” he says, explaining that a trip takes longer with the new guidelines.
Smith agrees that the changes in the rules governing drivers have had some impact but, in his opinion, not as much as the overall conditions. “There is no flow of equipment, which has hurt the industry,” he states.
Smith says that in some cases companies are paying the freight to get delivery and then paying for the dead head to get the truck back where it started so that the company is guaranteed getting that vehicle for the next load. He pointed out that this happens more often with some of the specialized trucks.
Smith says there has been some talk of establishing more coordination within the industry through the Flat Glass Logistics Council (FGLC) in terms of how transportation works, but nothing has been done yet (see sidebar at left).
Vitchus also makes the point that at all levels people need to be respectful of drivers’ time.
“When we don’t maximize their time, it causes backloads, and that’s a huge issue,” she says.
With higher fuel prices, the carriers are passing along price increases for fuel and fuel surcharges.
“This is driving increases in freight costs,” Smith says.
In terms of the higher fuel costs, Gouge says that the primaries are paying a “pretty healthy surcharge” (15 to 20 cents a mile) for diesel fuel. He points out that this year costs have risen a rather large amount in historical terms—double digits.
Gouge also makes the point that the FGLC is trying to educate the industry about transportation issues, including the loading and unloading times, so that they can be better addressed.
Frank Davis, executive director of FGLC, which was formed to deal with transportation and shipping issues, says the industry’s lack of communication and collaboration leads to waste of capacity.
“From 1980 to 2001 distribution costs in the United States declined from 16.2 percent to 9.5 percent of gross domestic product,” he points out. “But the flat glass industry has not experienced such savings. A good part of our industry’s supply chain problems are self-inflicted. We are still going about it the way we did in the 1960s. The buyer doesn’t tell the supplier anything about his needs and the supplier doesn’t tell the buyer any more than he needs to know. There is no communication,” Davis states.
“When does a building contractor know what kind of glass he is going to need for a building?” Davis asks, and says it would be good if contractors provide that information to the glass supplier once they know what will be used.
Certainly, today, in terms of transportation issues, the industry seems to be at cross-purposes. Perhaps FGLC will serve as that rest stop where everyone can get together and talk.
Half the Battle
Making a product is only half the battle. You have to get what you make to your customer. That’s where transportation comes in. Two recent factors that have had a dramatic effect in this area are the skyrocketing cost of fuel and the changes in the rules that govern drivers. Then there are the dedicated agreements, which are throwing a wrench into the works.
Glass manufacturers and many fabricators have raised their prices this year. And whether a company has its own fleet or uses a commercial trucking company, it is facing the same issues in terms of increased costs.
Those Cheatin’ Drivers
A new Insurance Institute for Highway Safety survey indicates that drivers of interstate trucks spend more time behind the wheel under a federal work rule that went into effect in 2004. This new rule lengthens the mandatory rest period by two hours, but lets drivers stay on the road an extra hour every day.
A workweek restart provision increases allowable driving hours in a seven-day period from 60 to 77. A quarter of drivers who were surveyed said they drive more than the new daily limit of 11 hours. Eight of ten drivers say they’re taking advantage of the restart provision that allows them to drive 25 percent more in a week.
Enforcement of work hours has long been a problem because written logbooks are easily falsified. The survey shows this hasn’t changed. About a third of drivers say they sometimes or often omit hours worked from their logbooks. A proposal to include electronic onboard recorders (tamper-resistant devices that can monitor driving hours) was dropped before the new rule went into effect.
Take a Load Off
FGLC’s Frank Davis admits that he doesn’t know how to make glass, but he does know a lot about supply chains. That’s why he’s so aggravated about what he sees in the glass industry.
To Davis, there’s a lack of collaboration and coordination at all levels, and he thinks at least part of this is caused by the industry’s anti-trust history.
“There’s the simple matter of dock scheduling,” he says. “You look at when the customer needs glass and then schedule the carriers to get the glass there at that time. Then schedulers know when the glass is going to be there and can act accordingly.” That, he says, is how the system should work.
“I know of one firm [Guardian] that is doing this and it has increased efficiency enormously. Loading time has gone from 3.5 to two hours and they get 98 percent productivity out of the dock space,” he stated.
“I think within another year or two, one of the big differences in costs will be how long it takes a company to load and unload trucks,” Davis says. “You’ve got to start thinking about the truck’s productivity as much as any piece of equipment that you’ve got. It’s part of your production line.”
He doesn’t see a shortage of hauling capacity; he sees it being used inefficiently. “We’re seeing the time for unloading can be as much as the time it takes to get the glass to the site,” he states.
FGLC is currently looking to establish guideline standards for loading and unloading glass.
In January of 2004, new regulations went into effect for drivers. They contained changes that allow a driver:
• To drive up to 11 consecutive hours (one-hour more than previously); they are required to rest for ten consecutive hours; and
• To work a total time in a day (or on-duty hours) of 14 hours, a decrease from the previous 15, or 11 hours of driving time and three hours of on-duty, non-driving for loading, waiting or other activities before the mandatory ten-hour rest.
Charles Cumpston is a contributing editor to USGlass magazine.
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