OMGT1062 Session 2 - Motor Carriers S1 2024

TRANSPORTATION & FREIGHT LOGISTICS
Session 2: Motor Carriers (Road)
Dr David
School of Accounting, Information Systems and Supply Chain
david.truong.ton@rmit.edu.au
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

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

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

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.

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/

Australian Road Freight Transport Industry
Australian National Road Network
Source: Australian National Transport Commission Report, 2016

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.

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

Domestic freight task (%
6.0 change)
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

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
0 markets
Interstate services Intrastate Urban
0.0 10.0 20.0 30.0 40.0 50.0
services services
Revenue ($
80 billion)
70
60
50
40
30
20
10
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
2029

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.

• 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
NS VI QLD WA S TA AC N
Source: Schroeder, N Mar 2023. Road Freight Transport in Australia,, report I4610 industry W C A S T T
report, IBIS World, viewed Jun 2023, IBISWorld database. Establishments Population

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


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

Types of Motor Carriers
Motor Carrier
Industry
For-Hire Private
Lo cal Intercity
Exem pt Co m m o n Contract Exem pt
Image courtesy of Cengage Learning

For-hire • Provide services to the public.
• Charge a fee for the service.

Carriers
• Provide a service to the industry or company that
Private owns or leases the vehicles.
• Do not charge a fee, but incur cost.
Carriers
• Transport commodities for hire as exempt for-
hire carriers.

For-hire carrier classification
5 1 o Local carriers pick up and deliver

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

5 2 o Common carriers are required to

Regulated
Local vs. serve the general public upon
demand, at reasonable rates, and
vs.
Intercity 1
Exempt without discrimination.
4  Further classified by the type
Com m on of commodity authorized to
General vs. vs. haul
Contract
Specialized o Contract carriers serve specific
TL vs. LTL
2 shippers with whom the
carriers have a continuing
3
contract.
Image courtesy of Cengage Learning  Dedicated carriage over
“dedicated” regular routes
5 3 o TL carriers provide service to

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

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

5 5 o An exempt for-hire motor carrier

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

Operating & Service Characteristics
Equipment
In most cases, equipment represents the

largest operating asset that a carrier
maintains.
Equipm en Position
Configuration and
t
: Cấu hình Deploym ent
Decisions
o Tractor . Axle (e.g. single, twin), engine, and o More important in an LTL
drive train combinations. operation than in a
o Trailer . Length (e.g. 28 feet, 45 feet, 48 feet, TL
53 feet) and type (e.g. dry van, refrigerated, operation.
ragtop, container, flatbed).

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

Line-haul Vehicle
Size (length)
Cargo-carrying
Federal/state maximum weight limits Capacity of
Line-haul
Density of the freight Vehicles

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

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/

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)

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: Refrigerated

Trailer top is vehicles: Cargo unit
open to permit has controlled
loading through temperature.
the top.
Flatbed: Trailer High cube: Cargo
has no top or unit is higher
sides, used than normal to
extensively to increase cubic
haul steel. capacity.
Images courtesy of (left to right/top to bottom) BDJ Trucking, Distribution Unlimited, Doc’s Trucking, Overdrive, Xpress2, GM

Terminal
o Pickup and Delivery Terminals (PUD),
also called satellite or end-of-the-line
1 (EOL) terminals, most commonly found in
the LTL hub-and-spoke system .
Break-bulk Terminals, commonly

2
o
found in the LTL hub-and-spoke
system .
Relay Terminals necessitated by the

3
Image courtesy of Cengage Learning o
maximum hours of service regulation
that is imposed on drivers.

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
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.

Break-Bulk Terminals
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

Relay Terminals
• 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

Relay Terminals – Australian standard hours of work & rest
https://www.nhvr.gov.au/safety-accreditation-compliance/fatigue-management/work-
and-rest-requirements/standard-hours

LTL Operation Recap
https://ars.els-cdn.com/content/image/1-s2.0-S0360835202000748-gr2.jpg
The LTL carrier PUD vehicle At the terminals,
1 collects the
shipments at the
shipper’s dock with a
2 returns to a
PUD or break-
bulk terminals.
3 the packages are
sorted by their
final destination.
PUD vehicle.
The trailers are

The shipments are
5 4
unloaded at another
loaded into 28-foot,
break-bulk terminal,
48-foot, or 53-foot
then sorted & reloaded
trailers for line
into a PUD vehicle for
haul.
delivery.
Terminal Management Decisions
o Number of Terminals
1 – The degree of market penetration and
customer service desired
– Terminal size vs. peddle run distance
tradeoffs
o Location of Terminals
– Hours-of-service regulation
2 – Consideration of backhauls between

terminals
– Market penetration and customer service
desired
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

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 Carrie Variabl
r Cost e Costs
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.
and in small increments of capacity fuel tax and vehicle
registration)
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

Cost Structure
Cost structure of Australian Road Freight Transport Industry
Road - Cost
50.0 Structure
40.0
30.0
20.0
10.0
0.0
2015 2016 2017 2018 2019 2020 2021 2022

2023 Sector - Cost
50.0 Structure
40.0
30.0
20.0
10.0
0.0
2015
2016

Current Issues
1 Safety
2 Technology
3 Driver Turnover

4 Financial Stability

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 o Electronic on-board recorders
fatigue (EOBRs)/Electronic logging device
o Vehicle size and weight (ELD)
RMIT University©2024 Image courtesy of OMGT1062 45
Current Issues
Driver Turnover
LTL Rate 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 o Recurring problem of overcapacity
attract and retain drivers

Q&A

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TRANSPORTATION & FREIGHT LOGISTICS

Session 2: Motor Carriers (Road)

RMIT University©2024 OMGT1062 2

RMIT University©2024 OMGT1062 3

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Australian National Road Network

Source: Australian National Transport Commission Report, 2016

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Total merchandise imports and exports (% change)

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forwarders: DHL Global 30.0

Forwarding, TNT, Schenker 20.0

Australia and Toll Holdings. 15.0

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Source: Australian National Transport Commission Report, 2016

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Source: Australian National Transport Commission Report, 2016

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Market Structure & Competition

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Exem pt Co m m o n Contract Exem pt

Image courtesy of Cengage Learning

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For-hire • Provide services to the public.

• Charge a fee for the service.

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For-hire carrier classification

5 1 o Local carriers pick up and deliver

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For-hire carrier classification

5 2 o Common carriers are required to

For-hire carrier classification

5 3 o TL carriers provide service to

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For-hire carrier classification

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For-hire carrier classification

5 5 o An exempt for-hire motor carrier

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In most cases, equipment represents the

Image courtesy of Cengage Learning

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Motor Carrier Vehicles

Line Haul City (Straight)

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Maximum loaded weight Maximum cargo weight (KG)

Queensland 27,500 25,000 23,500

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• The city truck has the cargo and power

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Dry van: Standard Tank trailer: Used

Open top: Refrigerated

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Break-bulk Terminals, commonly

Relay Terminals necessitated by the