E-commerce Delivery Demands Contribute to Record Trailer Orders

November 19, 2018 by Alan Adler, @AlanAdler

The delivery demands of e-commerce are contributing to record orders for truck trailers as shippers adopt relay-style trucking to speed freight movement.

But shop-at-home consumers are only part of the reason why manufacturers cannot build enough trailers to satisfy demand.

“Business is stupid good,” said Rob Fortney, director of dealer and international sales for Great Dane, the world’s largest trailer builder, whose nine U.S. plants are running at or near 100 percent capacity.

New trailer orders in September and October set all-time records. Orders were up 55 percent to 350,000 in the first 10 months of the year over the same period in 2017, according to ACT Research.

Replacement orders for aging vans average 230,000 to 250,000 units a year. The rest are in response to new business and threats of higher import tariffs and interest rates, according to industry experts.

The growth in manufacturing as part of an expanding U.S economy is keeping freight orders for construction and building materials and other goods at high levels.

“We’re not in a position to pursue any new business,” Fortney told Trucks.com. “We’re full through the second quarter of 2019. We just opened the order book for the third quarter.”

With few exceptions, a new trailer ordered today likely would be delivered next July, he said.

Big trucking companies, awash in profits after a year of robust freight demand that drove load prices up by double digits, are “refreshing their fleets a little earlier as a way to attract drivers,” said Michael DiCecco, executive managing director of asset finance at Huntington Bank.

The typical trade-in of nine or 10 years is down to seven years for big motor carriers, Fortney said.

Carriers also are trying to beat rising borrowing rates. Equipment finance rates that were 3 percent to 4 percent three years ago are now in the 5 percent to 6 percent range.

“If clients know they are going to replace or expand their fleet next year, it might make sense to do it before the next two or three interest rate hikes happen,” DiCecco said.

The trailer industry also faces rising costs from threatened 25 percent import tariffs on $200 billion in steel, aluminum and other manufacturing materials that could take effect in January. Those tariffs are currently 10 percent.

The Amazon Effect

Except for the occasional moving van, 53-foot trailers rarely travel on residential streets. But they play a part in helping fulfill last-mile delivery promises by Amazon and other e-commerce businesses to deliver goods to homes and businesses within two days of an order.

A recent study for XPO Logistics found that 37 percent of consumers expect to electronically order an item that weighs at least 150 pounds over the next 12 months.

FedEx and other shippers have ordered more trailers to keep up with demands. (Photo: Brian Hadden/Trucks.com)

Amazon, FedEx, UPS and the U.S. Postal Service have ordered more trailers. They are staged in hub-and-spoke warehouse schemes that move goods from trailers to medium-duty and smaller vehicles for delivery.

Manufacturers also are tinkering with just-in-time delivery schedules that require more frequent deliveries. For example, a Subaru plant in Lafayette, Ind., reduced its on-site stock of materials from 12 hours to four, said Frank Maly, ACT director of commercial vehicle transportation.

Long-Haul Clock Watching

Long-haul cargo trucks are challenged by federal hours-of-service rules that restrict commercial vehicle drivers to no more than 11 of 14 hours behind the wheel before a 10-hour break. Implementation of electronic logging devices earlier this year has made cheating on logs more difficult than when they were kept on paper.

A shortage of drivers and long wait times to unload cargo at some destinations worsen the situation. So-called detention time eats hours off the clock that could be spent driving.

“Fleets have gotten to the point where they are much more focused on the loss of productivity by the driver,” said Fortney of Great Dane.

Third-party logistics and full-service trucking firms are adding trailers for drop-and-hook operations that allow them to leave loaded trailers waiting for pickup along shipping lanes.

“This is being done to make the current driver population more productive and to move goods as fast as possible in a demanding freight market,” said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence.

The Electronic Logging Device mandate has forced customers of Wabash National, another major trailer builder, to buy more trailers for drop-and-hook use to keep drivers moving, said Brent Nussbaum, chief executive of Nussbaum Transportation Services Inc. in Hudson, Ill.

Nussbaum, which has 400 trucks and more than 900 trailers in service to move parts for Caterpillar Inc. and tires for many manufacturers, has used ELDs since 2007. It has felt no effect from the mandate, Nussbaum said.

Trailer Dealers Sold Out

From manufacturers unable to add production to motor carrier fleets to retail dealers, the message is the same: sold out.
“We’ve sold everything we can get our hands on,” said Joel Hought, branch manager at Northwest Truck & Trailer in Fargo, N.D. “Everything we have on order is sold.”

Nussbaum ordered about 40 percent more trailers for 2019 than for the current year. Some of the orders are for business growth, some to replace aging equipment and the rest to reduce rental trailers in the fleet.

The vocational trailer business covering tankers, asphalt and dump trucks and other specialty equipment is just as stretched, according to executives in the industry.

“Business is great but complicated,” said John Princing, president of Scientific Brake and Equipment in Saginaw, Mich. “Volumes are high, and pricing is volatile.

“We need to communicate with customers about lead times and pricing and tariffs,” Princing said. “All of this is adding more dealership time to each transaction.”

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