$150. Mapping the Texas Trucking Industry. Texas Trucking Alliance

Transcription

1 $150 Mapping the Texas Trucking Industry Texas Trucking Alliance

2 Executive Summary The 2014 Texas Trucking Industry Study evaluated some key demographic characteristics, measured financial indicators, looked at safety initiatives, and determined human resource practices of Texas trucking companies. As an enhancement, it also assessed the changes that have occurred since 2011 in several indicators and compared companies grouped by size, carrier type and other characteristic categories. The respondents were company owners, CEOs, principals, or key managers randomly selected from among the more than 18,000 Texas companies providing truck transport. The key findings presented here are arranged by topic. Industry Demographics - Distribution of companies by size, transport distance, cargo carriage type, and ownership characteristics Financial Benchmarks - Sales and sales expectations, profitability and profit expectations, planned equipment additions and replacements Human Resources - Driver recruiting and hiring practices, benefits and compensation, planned hiring activities, and recruiting practices Safety - Safety-related initiatives, safety expense levels and expectations. Texas Trucking Alliance 1

3 Industry Demographics The majority of Texas-based trucking companies are clustered in and around the Dallas- Ft. Worth, Houston, and San Antonio-Austin metro areas with 41% headquartered specifically in Dallas, Tarrant, Harris, Bexar, and Travis counties. The remainder are widely distributed among the dozens of secondary urban areas from Amarillo to Brownsville and from Texarkana to El Paso. The greatest number of companies (94%) operate out of one location. In 2014, Texas truckers were segmented into four groups by type of ownership: 1. Owner-operators - Companies in which the owner is personally involved in driving a truck and transporting cargo for a variety of customers. Owner-operators typically have fewer than a handful of drivers and many are single-person operations. Half of all Texas trucking companies are owner-operators (52%); 2. Independent Trucking Companies - Companies in which the owners or principals are not personally driving a truck and the company serves a wide variety of customers. Independents range in size from one to hundreds of drivers. Most Independents, however, are small and have 20 or fewer drivers. About a third of Texas companies are independents (31%); 3. Dedicated Private Fleets - Companies that are owned by or affiliated with a company that is their sole customer. Private fleets are among the largest trucking companies in the state. Some employ hundreds of drivers. In 2014, 10% of the companies surveyed were dedicated private fleets; 4. Non-Dedicated Private Fleets - Companies that are owned by or affiliated with a company that is their primary but not their sole customer. Non-dedicated private fleets also carry cargo for other customers. In 2014, 7% of the companies surveyed were nondedicated private fleets. Most Texas trucking companies are small businesses. Overall, 71% have sales of less than $1,000,000 per year, and about 95% of all Texas firms have fewer than 11 drivers. However, based on 2014 survey figures, a majority of trucks in Texas are owned by large companies. Texas truckers offer a wide variety of transport services and many firms carry more than one class of cargo. The survey looked at seven transport or cargo categories: Dry Goods Carriers Household Movers Hazardous Cargo Carriers Refrigerated Carriers Oversize/Heavy Haulers Aggregate Haulers Agricultural Product (non-refrigerated) Haulers. Texas Trucking Alliance 2

4 In fact, about half of truckers surveyed (47%) say they carry dry goods or general merchandise, while one in five (21%) carry household goods. A fourth offer oversized or heavy load hauling or transportation of sand, gravel, or aggregates (24% and 25%, respectively). Truckers carrying unrefrigerated agricultural products make up 23% of Texas truckers, and 9% provide refrigerated transport. Hazardous or flammable materials are carried by about 13% of trucking companies. Almost two-thirds of Texas trucking companies (63%) provide interstate transport, while the remainder (37%) operate only within Texas. In 2014, 70% of Texas truckers said they classified all their drivers as employees, while 9% hired only independent contractors and the remaining 21% had mixed driver pools of employees and contractors. Since 2011 the hiring of independent contractors has varied and appears tied to a company s sales growth. Growing companies make greater use of contract labor, perhaps as a means of meeting demand in the short term until they can grow their employee base. Overall, about one in six Texas trucking companies (17%) is a member of TXTA and 27% are members of the Owner Operator Independent Driver Association (OOIDA). Almost half of large companies (48%) belong to TXTA and 29% belong to the American Trucking Association. Small trucking companies are less likely to be trade association members than large firms but those that are most often are members of OOIDA (28%), TXTA (16%), or the Southwest Movers Association (12%). Texas Trucking Alliance 3

5 Financial Benchmarks The U.S. economy is picking up steam. The 288,000 jobs added nationwide in June reduced the unemployment rate to 6.1%, its lowest since September Texas has recovered from the Great Recession faster than the nation has. According to Texas Comptroller Susan Combs, the state s real gross domestic product increased 3.7% in 2013, more than double the 1.8% national rate. Many carriers delayed truck purchases during the Great Recession. As a result, more goods will need to be hauled by not enough trucks, and as that happens, shipping rates are expected to rise. Given that environment, it s no wonder Texas motor carriers are an increasingly optimistic bunch. According to the 2014 Texas Trucking Industry Study, almost half of Texas motor carriers, or 46.1%, expect a net revenue increase in 2014 from 2013, while less than 12% expect a decline. As for profits, 49% expect those to increase this year, while only 16.2% expect a decline. Perhaps mirroring the economic recovery, motor carriers have become more optimistic each year of the survey. In 2011, only 28% of trucking firms expected to see increased revenues. Should motor carriers trust their instincts? In 2013, 45.1% expected to increase their revenues from the year before, but about 40% actually did. Meanwhile, 18.1% expected a sales decline, but significantly more, 32.8%, experienced a drop. In contrast, only 32.9% expected sales in 2012 to increase, but 46% saw sales rise. So in 2013, carriers did a little worse than expected, and in 2012, they did better. Of course, revenues aren t the most important measure of a motor carrier s success profits are. In 2013, 28.6% of respondents experienced increased profits over the year before, though only seven companies, or 2.5%, reported they had increased greatly. More concretely, 29.6% reported profit margins of 11-20%, while 31.4% saw margins of more than 20%. Texas Trucking Alliance 4

6 Meanwhile, 11.8% of carriers reported No profit or loss, an increase from the year before, when 8.9% were only breaking even or worse. Moreover, 33.4% of Texas trucking companies saw profit declines last year about the same as in the previous year when 32.6% did. As with revenues, motor carriers turned out to be a little more optimistic in their profit projections than was warranted in That year, 41.3% had expected increased profits, while 24.2% had expected declines. Meanwhile, the average reported profit margin for the entire Texas trucking industry has not shown any significant changes in the three years the question has been asked. Among carrier types, those hauling products such as sand, lime, and aggregates are the most optimistic. Of that group, 57% expect 2014 to be more profitable than last year. However, some distinctions arise when looking at the large versus small carriers over multiple years. When it comes to revenues, big has proven to be better. In 2013, half of the large firms experienced revenue increases, compared to 39% of small firms. Small firms were more likely to report sales declines, with 34% seeing a drop, compared to 23% of large carriers. But when it comes to profit margins, just the opposite is. In 2013, smaller carriers averaged a 16% profit margin, compared to 11% for larger carriers. In fact, smaller carriers have reported higher profit margins than larger ones in all of the Texas Trucking Industry surveys. Why? Smaller carriers pay less of their revenues in total driver compensation 29% compared to 36% for larger companies, according to this year s survey. They also pay a smaller percentage of their revenues for non-driver staff 5% versus 11%. Still, both groups experienced a softening in profits. While smaller carriers reported average profit margins of 11% the last two years, larger carriers saw a decline from 21% to 16%. Among large companies, the percentage reporting profit increases shrank from 43% to 36%, while those reporting profit decreases rose from 25% to 35%. The number of smaller companies reporting profit increases also dropped, from 35% to 28%, while about a third reported profit decreases both years. It s often said of the stock market that past performance is no predictor of future results. The same could be said of trucking. Results were mixed last year, which they should be in an industry as diverse and decentralized as this one, where big companies exist but no one dominates. This much seems sure the economy is growing, resulting in higher employment, particularly in Texas. Those newly employed workers will be buying things, and some will be making them. Those goods will have to be delivered largely by trucks, so maybe motor carriers have reason to be optimistic about the future after all. Texas Trucking Alliance 5

7 Human Resource For the trucking industry, the best of times can be the worst of times in one important way: It s harder to find and keep good drivers. A poor economy makes drivers less willing to leave secure paychecks with their current employer in search of greener pastures. Bad economies also tend to hit hardest those industries that compete against trucking for the same talent: construction and manufacturing. According to the American Trucking Associations chief economist, Bob Costello, driver turnover during the Great Recession fell to about 50% nationally for fleets with at least $30 million in annual revenue. As the economy improves, drivers have more opportunities to leave current employers. For 2013, turnover averaged 96% across the country. The fourth quarter of 2013 was the eighth consecutive quarter in which turnover was above 90%. For a variety of reasons, including the regulatory climate and the aging driver workforce, the problem is expected to worsen over the long term. According to Costello, the trucking industry already has 30,000 unfilled jobs and will need to add almost 100,000 drivers each year during the next decade. Texas, of course, is not immune. The 2014 Texas Trucking Industry Study found that 69% of large carriers expect to hire additional drivers this year, and 85% expect to replace at least one current driver. Meanwhile, 40% of small firms expect to hire additional drivers, and 34% expect to replace current personnel. So how will Texas carriers keep the drivers they have while attracting new ones? Let s look at their recruitment tactics. Texas Trucking Alliance 6

8 First, carriers are increasing the kinds of benefits they offer. The percentage of carriers offering vacation, sick pay and paid leave increased from 27% in 2012 to 43% in More carriers are offering bonus pay for safety in 2014 (34%) than were offering it in 2012 (23%). Health insurance is now offered by 29% of carriers, compared to 20% just two years ago. However, benefits vary significantly across types of carriers. Hazardous cargo carriers are the most generous, with 39% offering health insurance and 58% offering vacation pay. Refrigerated carriers and oversized load haulers typically offer more benefits than the rest of the industry, while aggregate and agricultural product haulers offer less. Not surprisingly, carriers with increasing sales numbers offer more benefits than those with declining sales. When it comes to benefits, company size matters. Large carriers are far more likely than smaller carriers to offer certain benefits. For example, 70% of large carriers offer vacation, sick pay and paid leave, compared to 42% of small fleets. While 64% of large carriers offer health insurance, 27% of small carriers do. Twice as many large carriers offer driver recognition awards (64% versus 31%) and bonus pay for safety (64% versus 32%) as small carriers. Small carriers, meanwhile, are more likely to offer sales commissions (23% versus 20%). In addition to keeping the drivers they have, Texas carriers must find new ones. How they do that largely depends on the size of the carrier. When asked to identify which of eight ways of advertising they use to find new drivers (online, newspaper, truck signage, magazine, truck stop pamphlets, television/radio, Craigslist.org and Monster.com), 56% of small carriers said they didn t use any of them, while only 16% of large carriers answered the same way. Newspaper ads, used by 55% of large carriers and 27% of small ones, were the most often used method, while online ads followed closely behind (48% large, 23% small). In fact, use of online ads has increased steadily since Advertising is not the only way to find drivers. The study also asked about driver referrals and recruiting at truck stops, driving schools and community colleges. Small carriers are more likely than large carriers to describe these as very or somewhat useful methods. By far the most popular of these is driver referrals. About 82% of small carriers and 42% of large ones describe that method as very useful or somewhat useful. However, only 18% of small carriers encourage that behavior by offering referral bonuses, while 54% of large carriers offer bonuses for referrals. Still, the number of carriers paying referral bonuses overall has increased from 12% in 2012 to 20% in TXTA members are twice as likely as non-members to offer referral bonuses (34% versus 16%). Among those that do pay referral bonuses, large firm paid an average $403 per referral during the last three years, while small carriers paid an average $268. To find a safe, efficient, professional driver, that s probably money well spent. Texas Trucking Alliance 7

9 Safety More than ever, safety is an economic consideration for carriers in addition to being a moral one. More and more shippers and insurance providers use CSA scores to make business decisions. In order to succeed, carriers must comply with a long list of regulations and achieve clean inspections in addition to avoiding accidents. The 2014 Texas Trucking Industry Study found that the majority of Texas-based motor carriers continued to increase safety training and hire consultants in More than half, or 52.2%, said they had added driver safety training in 2013, while 19.3% had hired outside safety consultants. However, those numbers reflect slightly lower rates than a year earlier, when 56.2% of Texas carriers said they had added safety training and 18.4% said they had hired consultants. The slowing was even more pronounced when looking at which companies had hired additional safety personnel; in 2012, 21.7% of respondents made that investment while, in 2013, 13.5% did. What s happening? TXTA President and CEO John Esparza said it is possible that Texas motor carriers had made significant safety investments immediately after the Federal Motor Carrier Safety Administration adopted CSA early in the decade. Perhaps at this point, they are continuing the momentum, but not increasing it. Results were mostly consistent across large and small carriers. Among large carriers, 73% added training in 2013 compared to 86% the year before; 35% hired consultants in 2013 versus 45% in 2012; and 38% hired additional personnel, a drop from 50% in Among small carriers, 52% added training in 2013 versus 56% in 2012, and 12% added personnel compared to 21% the year before. The one area where the rate of new safety investments increased was in the percentage of small companies hiring consultants. In 2013, 18% did so, an increase from 15% in Esparza said the association has noticed that trend and is identifying consultants who can help carriers navigate the regulatory climate. Notably, intrastate carriers were more likely than interstate carriers to add training, and to hire safety consultants and safety personnel in In 2012, the opposite was true. Texas Trucking Alliance 8

10 The study showed that TXTA members were more likely than non-members to add driver safety training in 2013 (59% versus 50%). That difference narrowed from 2012, when the percentages were 73% and 53%. Perhaps that trend is the result of TXTA members making safety investments earlier than non-members because TXTA members tend to be larger carriers with more resources. TXTA members also were more likely to hire consultants (28% versus 17%) in 2013, but they were no more likely to hire additional. Among the various transport segments, hazardous cargo carriers were by far the most likely to add driver safety training (69%) in 2013, which makes sense, given the nature of their hauls. However, that segment had trailed oversize/heavy haulers, household movers, and dry goods carriers the year before. Hazardous cargo carriers were also the most likely to add safety personnel (21%) in 2013, but the difference with most other segments was not large. In addition, most other transport segments had hired more personnel at a greater rate in Agricultural product haulers in 2013 were the most likely to hire outside safety consultants (29%); in 2012, they also were the most likely to have done so, along with dry goods carriers. The comment period for the Federal Motor Carrier Safety Administration s proposed electronic onboard recorder (EOBR) mandate has closed. Regardless of what happens with the mandate, every carrier must decide whether or not to use the devices. Clearly, large carriers have been quicker to embrace the technology. About 28% of large carriers purchased EOBRs in 2013, compared to 13% of small fleets. The percentages were slightly higher the year before. Also on the EOBR question, TXTA members were about equally as likely as nonmembers to purchase the equipment in 2013 (15% versus 14%), but they were significantly more likely to have done so in 2012 (24% versus 12%). Intrastate carriers were more likely than interstate carriers to purchase the equipment in 2013, (18% versus 12%), but as with other safety expenses, the opposite had been true the year before (9% versus 19%). Hazardous materials carriers were the most likely transport segment to purchase the equipment in 2013, followed by household movers. Interestingly, while 23% of refrigerated transport haulers purchased EOBRs in 2012, only 2% did so in 2013, suggesting that most of the refrigerated haulers who planned voluntarily to install the equipment may have done so already. Texas Trucking Alliance 9

11 Highly Successful Subgroup To learn how to excel, study the excellent. With that in mind, the Texas Trucking Industry Study each year pays special attention to what it calls the Highly Successful Subgroup (HSS) carriers with profit margins of at least 10%, growing revenues, and at least 11 drivers. This is a small sample size of only 25 carriers composing about 15% of large company respondents. That s an increase from last year, when just 21 carriers qualified. Qualifying carriers in 2014 generally are neither very small nor very large. Twenty have between 11 and 50 drivers. However, nine of the companies, or 36%, reported profit margins of greater than 20%. About 19.2% of the rest of the survey participants reported such high profit margins. Thirteen of the companies, or 65%, have revenues of $10 million, a significant increase from 2013, when only four companies reported that total. (Five HSS carriers did not answer that question in 2014, while three did not provide the information last year; they were not included in calculating the percentages.) Because the sample size is so small, caution should be exercised in drawing conclusions across the Texas motor carrier industry. However, in this year s survey, significant differences are apparent when comparing the HSS fleets to the rest of carriers. Those include: Use of contract drivers. About 36% of HSS carriers use only employee drivers, compared to 56% of the rest of the respondents. Another 48% of HSS carriers use a mix of employee and contract drivers, while 16% use only contract drivers. Among the rest of the respondents, 35% use both and 9% use contract drivers only. Driver benefits. HSS carriers are more likely to offer certain benefits, including guaranteed time at home (71% versus 46%), health insurance (56% versus 38%), and bonus pay for safety (68% versus 45%). On the other hand, they are about equally likely to offer driver recognition awards. HSS carriers also are less likely to offer revenue sharing pay (16% versus 19%) and a 401(k) retirement plan (16% versus 18%) than the other respondents. Last year, a third of the HSS carriers offered a 401(k) retirement plan, compared to 14.5% of the rest of the respondents. Safety. HSS companies were more likely to have added safety training for drivers in the past year (72% versus 65%) and to have hired safety personnel (40% versus 24%). They were about equally as likely to have purchased electronic onboard recorders (20% versus 21%), but were significantly less likely to have hired outside safety consultants (12% versus 27.6%). However, HSS carriers had made significantly higher investments in all of those areas as of last year s study. Texas Trucking Alliance 10

12 Spending. Only 24% of HSS carriers reported spending at least 60% of their revenues on operating expenses versus 42% of other respondents. In 2013, the difference was even wider (13% versus 38%), although only 15 of the 21 companies offered a percentage. HSS carriers were less likely than other respondents to spend 10% or more of their revenues on non-driver compensation (24% versus 35.5%) in the 2014 survey. Recruiting. HSS carriers are more likely to regard driver referrals as useful, to recruit new drivers from internal and outside driving schools, to use online and website ads, and to advertise for drivers on Craigslist.org. Association. HSS members are more likely to be members of the TXTA and the American Trucking Associations. Optimism. Success breeds success. Among HSS carriers, 72% expect 2014 revenues will be higher and 67% expect higher profits, compared to 45% and 46% of the other respondents. HSS carriers are more likely to plan to add and replace drivers and trucks. Texas Trucking Alliance 11