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The information on this page is a a copy of a document published by: Federal Highway Administration Office of Freight Management and Operations For further information about this information, contact Bob Davis, Office of Freight Management and Operations, at (202) 366-2997, or at Robert.Davis@FHWA.DOT.GOV.
FREIGHT INDUSTRY PERFORMANCE MEASUREMENT: On-Going Evaluation and Reporting Initiative: “Application of ‘Cost-per-Mile’ Indicator”
Purpose: to develop a reliable, easily compiled, and readily reportable indicator of motor carrier industry performance.
Background: Federal Highway Administration’s Office of Freight Management & Operations (HOFM) has sought to define workable measures for productivity and efficiency improvements. Several sources had recommended an economic measure, such as “Cost per Ton-Mile” or “Cost per Mile”, as a possible source of definitive information that could be used to report annually on the state of highway freight transportation.
Data on the cost of highway freight per mile and per ton-mile are now available in the Financial and Operating Statistics (F&OS) maintained by the American Trucking Associations and the Blue Book of Trucking Companies maintained by Transportation Technical Services of Fredericksburg, Virginia. These data are also available to the Bureau of Transportation Statistics (BTS) through current motor carrier reporting requirements.
Class I and II trucking firms have been reporting on their expenses, tons carried, and miles traveled for decades, so a considerable volume of data is already available on which to assess both “Cost per Ton-Mile” and “Cost per Mile” as potential indicators of industry productivity.
Determination: an initial review of both measures by Transportation Technical Services (TTS) for HOFM found that the two generally paralleled one another’s ups and downs over the 24-year reporting period examined (1976-1999).
TTS reported, however, that “Cost per Ton-Mile” had some significant reporting problems. Motor carriers either did not consistently report the ton-mile data, year after year, or calculated the ton-mile denominator incorrectly, greatly exaggerating the tons carried and miles traveled, thus producing an invalid measure of “cost per unit of output”.
Initial Conclusions: “Cost per Mile” may provide a better indicator to track the industry because:
§ It is readily available and, thus, easily captured; § The meaning of “vehicle mileage” is intuitively understood by users; § It was, by far, the more accurately reported statistic in our sample; and § As it corresponds, across reporting years, to “Cost per Ton-Mile” trends among sampled carriers, HOFM believes that it could also prove useful as a cost per output indicator.
General Industry Trends Revealed. A dramatic percent decline was evidenced from 1986 to 1997, along with a subsequent rise in annual “Cost per Mile” figures between 1997 and 2000. HOFM believes this situation may reflect several phenomena:
§ Federal deregulation of the trucking industry in 1980, which eventually led to overcapacity and, thus, lower market prices being charged to shippers;
§ State deregulation of trucking in the 1980’s and 1990’s;
§ The 1982 changes in truck size and weight requirements that likely spawned productivity improvements;
§ Introduction of national uniformity in vehicle registration and fuel tax reporting;
§ Introduction of electronic clearance programs, such as CVISN;
§ Pricing flexibility brought about with deregulation, which was apparently exploited by shippers, thus promoting general decline in market price;
§ Concomitant improvements in vehicle technologies and fuel economy, better highways, communication technologies, etc. that may have helped to make operations more cost-efficient; and
§ In recent years, increases in wages, maintenance, and fuel, along with a national driver shortage, which may be reflected in the small national increase in the annual “Cost per Mile” figures reported.
Variations Among Segments of Trucking Industry. Between truckload and less-than-truckload carriers, and among specialty carriers, we found some apparent distinctions:
§ Truckload operations tend to mirror the downward movement of costs per mile. However, Less-than-Truckload’s cost-per-mile increases seems to reflect:
o a shift toward higher-cost -- and higher priced -- small shipments as a function of their operations (35% to almost 75% of total shipments over the sample period); and
o A greater reliance upon union labor for LTL operations.
§ Among Specialty Carriers, HOFM is somewhat less able to ascribe potential reasons for particular changes that “buck” the significant downward industry trend:
o Automobile carriers may have experienced rising costs due to more stringent vehicle requirements demanded by manufacturers, such as greater vehicle security design to protect the cars transported from en route damage. Automobile carriers are also highly unionized, and lengths of haul tend to be shorter (shorter hauls reflect higher costs per mile).
o Tank truck carriers saw a lesser decline of costs per mile than the industry as a whole. The use of specialized equipment, and more stringent shipping and safety regulations (tank cleaning regulations imposed by the EPA; skyrocketing insurance costs), acted to both reduce the number of carriers and hinder a great influx of new competitors.
What’s Next?
We are continuing to work with the BTS to design and put in place a regular program of data collection, analysis and reporting, drawing on a consistent sample of commercial motor carriers, to generate an on-going, readily available report on the status of industry expenditures and operations.
However, we note that some improvements are needed. The reporting of carriers’ cost elements needs to better isolate the specific components that make up the total cost figure.
Also, a program to pinpoint owner-operator costs would serve to markedly enhance real-world trucking data available to BTS. Currently, reporting trucking firms that rely upon owner-operator labor tend not to detail the costs that their operations incur.
For further information about this on-going initiative, contact Bob Davis, Office of Freight Management and Operations, at (202) 366-2997, or at Robert.Davis@FHWA.DOT.GOV.
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