TRANSPORTATION & FREIGHT LOGISTICS

Session 2: Motor Carriers (Road)

Dr David
School of Accounting, Information Systems and Supply Chain
[email protected]
Outline
• Motor Carrier Characteristics
• Australian Road Freight Transport Industry
• Types of Motor Carrier
• Operating & Service Characteristics
• Cost Structure
• Current Issues

http://trucktrailers.blogspot.com/2013/08/saia-motor-freight-line-inc-johns-creek.html

RMIT University©2024 OMGT1062 2

Motor Carrier Characteristics
o Most important business user
o Primary advantage is flexibility
o Cost is generally lower when compared to airfreight
o LTL vs. TL
o Freight characteristics:
– Able to carry comprehensive range of goods

– High-value finished products

RMIT University©2024 OMGT1062 3

Motor Carrier Characteristics
o Less-than-truckload (LTL)
– 150 to 10,000 pounds (~ 68 to 4,535 kg)

– Too big to be handled manually, too small to fill a truck

– LTL trucks carry shipments from many shippers

o Truckload (TL)
– Focus on shipments > 10,000 pounds (> 4,535 kg)

– Close to the amount that would physically fill a truck trailer

– Possible that large shipments from several customers can be consolidated

– Process: Shipments tend to move directly from the shipper’s location to the
consignee’s location

RMIT University©2024 OMGT1062 4

Motor Carrier Characteristics

Strengths

o Door-to-door service

o Accessible (good market coverage)

o Secure (few transfers)

o Fast on door-to-door basis

o Flexible/adaptable

o Frequent

RMIT University©2024 OMGT1062 5

Motor Carrier Characteristics

Limitations

o Carrying capacity Transportation energy consumption by mode 2012

o Environmental impact
(see slide 6, Lecture note of Session 3)

o Vulnerability to external factors

o High energy consumption

o Shared right of way

Source: U.S. Energy Information Administration, 2016, International Energy Outlook 2016 , US, Washington DC.

RMIT University©2024 OMGT1062 6

 Motor Carrier Characteristics
Limitations

Source: https://transportgeography.org/contents/chapter4/transportation-and-energy/energy-
consumption-transportation-united-states/

Source: https://transportgeography.org/contents/chapter4/transportation-and-
energy/transportation-mode-energy-efficiency/

RMIT University©2024 OMGT1062 7

Australian Road Freight Transport Industry

Australian National Road Network

Source: Australian National Transport Commission Report, 2016

RMIT University©2024 OMGT1062 8

Australian Road Freight Transport Industry
Network-assigned origin–destination road freight flows

Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE) 2019, Australian aggregate freight forecasts – 2019 update, Research Report 152, Canberra, ACT.

RMIT University©2024 OMGT1062 9

Australian Road Freight Transport Industry

Source: Schroeder, N Nov 2023. Road Freight Transport in Australia,, report I4610 industry report, IBIS World, viewed Jun 2024, IBISWorld database.

RMIT University©2024 OMGT1062 10

 Australian Road Freight Transport Industry
Domestic freight task (% change)
6.0

5.0

4.0

3.0

2.0

1.0

0.0

-1.0
2014 2016 2018 2020 2022 2024 2026

Total merchandise imports and exports (% change)

30.0

25.0

20.0

15.0

10.0

5.0

0.0

-5.0

-10.0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Source: Schroeder, N Nov 2023. Road Freight Transport in Australia,, report I4610 industry report, IBIS World, viewed Jun 2024, IBISWorld database.

RMIT University©2024 OMGT1062 11

 Australian Road Freight Transport Industry
Revenue (%) Revenue (%)
60

Other markets
50

40 Fuel retailers

30
Downstream users of agricultural output

20 Downstream markets for manufactured

goods
10
Crude material and chemical markets
0
Interstate services Intrastate services Urban services
0.0 10.0 20.0 30.0 40.0 50.0

Revenue ($ billion)
80

70

60

50

40

30

20

10

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Source: Schroeder, N Nov 2023. Road Freight Transport in Australia,, report I4610 industry report, IBIS World, viewed Jun 2024, IBISWorld database.

RMIT University©2024 OMGT1062 12

 Australian Road Freight Transport Industry

Source: Australian Infrastructure 2019, An assessment of Australia’s future infrastructure needs. The Australian Infrastructure Audit 2019, Canberra ACT.
Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE) 2019, Australian aggregate freight forecasts – 2019 update, Research Report 152, Canberra, ACT.

RMIT University©2024 OMGT1062 13

 Australian Road Freight Transport Industry
• No major players
• Australian top three operators
– Toll: 9th largest global transport
operator in 2012
– Linfox: $2,500 million revenue
in 2012-2013 with 3,2 million
square metres of warehousing
– K&S: $604 million revenue in
2014-2015 with over 160,000
square metres of warehousing
Distribution of Enterprises vs Population (%)
• Australian top four 35.0

forwarders: DHL Global 30.0

25.0

Forwarding, TNT, Schenker 20.0

Australia and Toll Holdings.

15.0

10.0
Source: Australian National Transport Commission Report, 2016 5.0

0.0
NSW VIC QLD WA SA TAS ACT NT
Source: Schroeder, N Nov 2023. Road Freight Transport in Australia,, report I4610 industry
report, IBIS World, viewed Jun 2024, IBISWorld database. Establishments Population

RMIT University©2024 OMGT1062 14

Australian Road Freight Transport Industry

Source: Inquiry into National Freight and Supply Chain Priorities, Supporting paper No. 3, Road and rail freight,
March 2018 © Commonwealth of Australia 2018.

Source: Australian National Transport Commission Report, 2016

RMIT University©2024 OMGT1062 15

 Australian Road Freight Transport Industry

Source: Australian National Transport Commission Report, 2016

RMIT University©2024 OMGT1062 16

Australian Road Freight Transport Industry

Market Structure & Competition

Monopolistic
Oligopolistic Competition
Competition

A large number of A small number of relatively large firms

relatively small firms with some degree of capital constraint for
with relative freedom of entry.
entry and exit due to • LTL: Significant investment in a network
limited capital of terminals
requirement. • Special equipment carriers: Larger
investments in equipment and terminals
o TL sector with strong than general freight
competition with • Large, national TL carriers: Significant
private carriers. capital investment for scale and
geographic scope of operations

RMIT University©2024 OMGT1062 17

Types of Motor Carriers

Motor Carrier Industry

For-Hire Private

Local Intercity

Exempt Common Contract Exempt

Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 18

Types of Motor Carriers

• Provide services to the public.

For-hire
• Charge a fee for the service.
Carriers

• Provide a service to the industry or company

Private that owns or leases the vehicles.
Carriers • Do not charge a fee, but incur cost.
• Transport commodities for hire as exempt
Image courtesy of Cengage Learning for-hire carriers.

RMIT University©2024 OMGT1062 19

 Types of Motor Carriers

For-hire carrier classification

5 1 o Local carriers pick up and deliver

Local vs. freight within the commercial zone
Regulated
Intercity
vs. Exempt 1 of a city.
o Intercity carriers operate between
4 specifically defined commercial
Common zones.
General vs. vs.
Specialized Contract o Local carriers and intercity carriers
often work in conjunction.
TL vs. LTL
2
3
Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 20

 Types of Motor Carriers

For-hire carrier classification

5 2 o Common carriers are required to

Regulated
Local vs. serve the general public upon
Intercity demand, at reasonable rates, and
vs. Exempt 1
without discrimination.
4  Further classified by the type of
Common commodity authorized to haul
General vs. vs.
Specialized o Contract carriers serve specific
Contract
shippers with whom the carriers
TL vs. LTL
2 have a continuing contract.
3  Dedicated carriage over
“dedicated” regular routes
Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 21

 Types of Motor Carriers

For-hire carrier classification

5 3 o TL carriers provide service to

Local vs. shippers who tender sufficient
Regulated
Intercity
vs. Exempt 1 volume to meet the minimum
weights required for a truckload
4 shipment.
Common o LTL carriers provide service to
General vs. vs.
Specialized shippers who tender shipments
Contract
lower than the minimum truckload
TL vs. LTL
2 quantities
3  “Heavy LTL” motor carriers
(upper end of LTL shipments)
Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 22

 Types of Motor Carriers

For-hire carrier classification

5
Local vs.
4 o Specialized motor carriers haul a
Regulated special commodity such as:
Intercity
vs. Exempt 1
 Odd-sized and/or heavy
4 freight
Common  Liquid products
General vs. vs.
Specialized Contract  Freight requiring controlled
temperature
TL vs. LTL
2
 Hazardous materials
3

Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 23

 Types of Motor Carriers

For-hire carrier classification

5 5 o An exempt for-hire motor carrier

Regulated
Local vs. transports exempt (unregulated)
Intercity commodities owned by others for
vs. Exempt 1
compensation.
4
Common
o The exempt commodities usually
General vs. vs. include unprocessed or
Specialized Contract unmanufactured goods, fruits and
vegetables, and other items of little
TL vs. LTL
2 or no value.
3
Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 24

Operating & Service Characteristics
Equipment

In most cases, equipment represents the largest

operating asset that a carrier maintains.

Equipment Position
Configuration and
Decisions
Deployment

o Tractor . Axle (e.g. single, twin), engine, and o More important in an LTL
drive train combinations. operation than in a TL
o Trailer . Length (e.g. 28 feet, 45 feet, 48 feet, operation.
53 feet) and type (e.g. dry van, refrigerated,
ragtop, container, flatbed).
RMIT University©2024 OMGT1062 25
Operating & Service Characteristics

Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 26

Operating & Service Characteristics
Vehicle

Motor Carrier Vehicles

Line Haul City (Straight)

o Line-haul vehicles are used to haul o City straight trucks are used within
freight long distances between a city to provide pickup and
cities. delivery service.
o Usually a tractor–trailer o Normally smaller than line-haul
combination of three or more axles. vehicles and are single units.

RMIT University©2024 OMGT1062 27

Operating & Service Characteristics
Line-haul Vehicle

Size (length) Cargo-carrying

Capacity of
Federal/state maximum weight limits Line-haul
Vehicles
Density of the freight

RMIT University©2024 OMGT1062 28

Operating & Service Characteristics
Australian Road Weight Limits
• Maximum road weight limit is 42,500kg (combined weight of both the
truck, trailer, container and cargo)

https://www.mtflogistics.com.au/files/road-weight-limits.php

RMIT University©2024 OMGT1062 29

Operating & Service Characteristics
Australian Road Weight Limits

Maximum loaded weight Maximum cargo weight (KG)

of container (KG) 20 feet 40 feet
Queensland 27,500 25,000 23,500
New South Wales 26,000 23,500 22,000
Victoria 27,000 24,700 22,800
South Australia 26,900 & 28,000 24,400 24,000
Western Australia 24,500 22,000 20,500
http://www.cargonetwork.com.au/container-weight-limitations/

RMIT University©2024 OMGT1062 30

 Operating & Service Characteristics
City Straight Vehicles

• The city truck has the cargo and power

unit combined in one vehicle.
• The typical city truck is approximately
20 to 25 feet long with a cargo unit 15
to 20 feet long.
• “Loaded to ride” – Use of small
trailers (28 feet) for pick up/deliver in
the city and for line-haul.
Images courtesy of Internationale Automobil-Ausstellung (IAA)

RMIT University©2024 OMGT1062 31

 Operating & Service Characteristics
Special vehicles designed to meet special shipper needs

Dry van: Standard Tank trailer: Used

trailer or straight to haul liquids like
truck with all sides petroleum products.
enclosed.

Open top: Trailer Refrigerated

top is open to vehicles: Cargo unit
permit loading has controlled
through the top. temperature.

Flatbed: Trailer High cube: Cargo

has no top or sides, unit is higher than
used extensively to normal to increase
haul steel. cubic capacity.

Images courtesy of (left to right/top to bottom) BDJ Trucking, Distribution Unlimited, Doc’s Trucking, Overdrive, Xpress2, GM

RMIT University©2024 OMGT1062 32

Operating & Service Characteristics
Terminal
o Pickup and Delivery Terminals (PUD),

1
also called satellite or end-of-the-line
(EOL) terminals, most commonly found in
the LTL hub-and-spoke system .

2
o Break-bulk Terminals, commonly
found in the LTL hub-and-spoke
system .

3
Image courtesy of Cengage Learning o Relay Terminals necessitated by the
maximum hours of service regulation
that is imposed on drivers.

RMIT University©2024 OMGT1062 33

 Operating & Service Characteristics
Pickup & Delivery (PUD) Terminals

o Provide the pickup and/or

delivery services for freight on
peddle runs.
o Two elements of a peddle run
o Stem time
Image courtesy of Cengage Learning o Peddle time
o Services performed
o Shipment consolidation and
distribution operations.
o Vehicle dispatch operations
o Other services e.g. tracing,
rating and billing, sales, and
claims.
Source: Watson M, Lewis S, Cacioppi P, & Jayaraman J 2012 , Supply Chain Network Design: Applying Optimization and Analytics to the Global Supply Chain, FT Press Operations Management, US.

RMIT University©2024 OMGT1062 34

Operating & Service Characteristics
Break-Bulk Terminals

Image courtesy of Cengage Learning

https://lca.asia/news-events/general-trade-stagnated/

o Provide an intermediate point where freight with common destinations from

the PUD terminals is combined to facilitate higher utilization of vehicle
capacity.
o Services performed
– Shipment consolidation and dispersion (or break-bulk) operations

– Long-haul driver domiciles

RMIT University©2024 OMGT1062 35
Operating & Service Characteristics
Relay Terminals

Image courtesy of Cengage Learning

• Relay terminals are different from the PUD and break-bulk terminals in that
freight is never touched.
• Services performed. At the relay terminal, one driver substitutes for another
who has accumulated the maximum hours of service (11 hours after 10
consecutive hours off duty).
https://www.fmcsa.dot.gov/regulations/hours-service/summary-hours-service-regulations

• “Slip seat” and sleeper team – An alternative to the use relay terminal

RMIT University©2024 OMGT1062 36

 Operating & Service Characteristics
Relay Terminals – Australian standard hours of work & rest

https://www.nhvr.gov.au/safety-accreditation-compliance/fatigue-management/work-
and-rest-requirements/standard-hours

RMIT University©2024 OMGT1062 37

Operating & Service Characteristics

LTL Operation Recap

https://ars.els-cdn.com/content/image/1-s2.0-S0360835202000748-gr2.jpg

1 2 3
The LTL carrier PUD vehicle At the terminals,
collects the shipments returns to a PUD the packages are
at the shipper’s dock or break-bulk sorted by their
with a PUD vehicle. terminals. final destination.

The trailers are unloaded

4
The shipments are

5
at another break-bulk
loaded into 28-foot,
terminal, then sorted &
48-foot, or 53-foot
reloaded into a PUD
trailers for line haul.
vehicle for delivery.
RMIT University©2024 OMGT1062 38
Operating & Service Characteristics
Terminal Management Decisions

Number of Terminals
1
o
– The degree of market penetration and
customer service desired
– Terminal size vs. peddle run distance
tradeoffs

o Location of Terminals
– Hours-of-service regulation
Image courtesy of Cengage Learning

2 – Consideration of backhauls between

terminals
– Market penetration and customer service
desired
RMIT University©2024 OMGT1062 39
Fuel Management Strategies

• Fuel surcharge • Bulk purchasing

• Off-peak delivery • Equipment adjustments

• Engine idling time • Large fuel tank

• Optimal road speed • Prevent out-of-fuel occasions

• Out-of-route miles • Prevent fuel leakage and theft

• Network truck stops • Fuel optimizer software

RMIT University©2024 OMGT1062 40

 Cost Structure
Fixed and Variable Cost Components

High levels of variable costs and relatively low fixed costs, with
higher fixed cost in LTL operation due to terminal systems

Low Motor High

Fixed Carrier Variable
Costs Cost Costs

o The public investment in the o Labor

highway system o Fuel
o Ability to increase /decrease number o Maintenance
of vehicles in short periods of time o Highway user fees (e.g. fuel
and in small increments of capacity tax and vehicle registration)
RMIT University©2024 OMGT1062 41
Cost Structure
Operating Ratio

“Operating ratio is a measure of operating efficiency

and a benchmark of financial viability.”

o The operating ratio measures the percent of

operating expenses to operating revenue.
– (Operating expenses ÷ Operating revenue) x 100

– LTL motor carriers – between 93 and 98

– TL motor carriers – low to mid 80s

RMIT University©2024 OMGT1062 42

 Cost Structure
Cost structure of Australian Road Freight Transport Industry
Road - Cost Structure
50.0

40.0

30.0

20.0

10.0

0.0

2015 2016 2017 2018 2019 2020 2021 2022 2023

Sector - Cost Structure
50.0

40.0

30.0

20.0

10.0

0.0

2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Schroeder, N Nov 2023. Road Freight Transport in Australia,, report I4610 industry report, IBIS World, viewed Jun 2024, IBISWorld database.

RMIT University©2024 OMGT1062 43

Current Issues

1 Safety

2 Technology

3 Driver Turnover

Image courtesy of Cengage Learning

4 Financial Stability

RMIT University©2024 OMGT1062 44

Current Issues

Safety Issues Technology Issues

Importance Importance
o Government rules for motor carrier o Enhance management control
safety fitness inspections o Enable timely communications
o Safety impact on profitability o Enhance environmental safety in
Key issues hazardous material (HazMat) movement
o Labor safety Key technology
o Alcohol and drug abuse o Satellite technology and GPS systems
o Drivers’ hours of service and fatigue o Electronic on-board recorders
o Vehicle size and weight (EOBRs)/Electronic logging device
Image courtesy of Cengage Learning (ELD)
RMIT University©2024 OMGT1062 45
Current Issues

Driver
LTL Rate
Turnover
Issues Financial Stability Issues

Importance Importance
o Costly ($3,000 - $12,000 per driver) o Carrier financial stability is now an
o Turnover rate is very high important aspect of carrier selection.
Key issues Key issues
o Shortage because of challenging work o High operating ratios (exceeding 95%) are
environment indications of financial plight and low
o Job hopping competitive rates.
o Carriers need better ways to attract o Recurring problem of overcapacity
and retain drivers
Image courtesy of Cengage Learning

RMIT University©2024 OMGT1062 46

Q&A

RMIT University©2024 OMGT1062 47