Editor’s note: Written by Aaron Terrazas, Director of Economic Research at Convoy, a digital freight network. This is one in a series of periodic guest columns by industry thought leaders.
Waste matters. For nearly every industry, waste contributes to higher costs. But in the freight industry, the stakes are even higher. In freight, waste means that more fuel is consumed, more carbon emitted, and drivers spend more hours sitting idle.
The industry has made significant advances in recent decades toward improving vehicle fuel economy: The average fuel economy of the typical heavy-duty truck has improved almost 20 percent since the early 1980s, according to the U.S. Department of Energy. Drag-reducing trailer design and modifications add to those savings.
But reducing the number of miles that carriers drive empty – also known as deadhead miles – has proven to be a more elusive challenge. Following the push to make freight more efficient after the global oil crisis of the early 1970s, the share of total miles that truckers drive empty has been consistently stuck around 35 percent since at least the late 1990s.
Of course, some individual carriers are able to do better. There are always a lucky few who are able to find a closed loop schedule, with deadhead miles approaching zero. Some are able to cherry-pick the routes and shipments they accept to limit their empty miles. But they are outliers and do nothing to advance the state of the industry as a whole. At the other extreme – though no one would like to admit it – some carriers run as high as 55 percent of their miles empty.
For carriers, particularly owner-operators, this means that those operating costs must be built into rates where possible pushing up freight expenses for shippers and consumers. For the environment, it means that about 10 percent of the 440 million metric tons of carbon dioxide emissions annually associated with U.S. medium- and heavy-duty freight occur while trucks are running empty. That is roughly equivalent to one-month of Canada’s annual carbon emissions.
Finding ways to reduce empty miles has the potential to be a rare triple win for consumers, for truckers, and for the environment.
The persistence of the industry-wide average empty miles ratio of 35 percent suggests that perhaps there is a limit to how tight the average human scheduler can fill a truck’s calendar. It’s hardly a surprise then, that technology can do better. Evaluating different combinations of routes and constantly scanning load availability is ideal work for computers and algorithms.
Our early experience at Convoy suggests that there is promise in algorithms that assess different combinations of loads to best fill a truck’s schedule. (Convoy’s app-based platform algorithmically identifies and combines these shipments and recommends them to carriers searching on the app.)
On average, these batches have average deadhead miles of around 19.5 percent. There is room for improvement. As shipment volume increases and algorithms improve, we estimate that the average deadhead percentage could fall much lower. But given the current state of the world, that means there are potentially deadhead savings of 16 percentage points (at least 25 and 30 miles) for the average load.
Small improvements add up over time and over the miles to have a big impact. Even this conservative estimate of the potential for industry-wide deadhead reduction to 19.5 percent would translate into carbon dioxide equivalent emissions savings on the order of 20 million metric tons from dry van and refrigerated freight alone. That’s roughly the equivalent of taking all of New York’s passenger vehicles off the road for a full year or planting over the state of Rhode Island twice with tree seedlings (about 331 million total) and allowing them to grow for 10 years.
BOTTOM LINE PERFORMANCE
For carriers, the impact is no less impressive. Deadhead miles are rarely the only – or even the primary metric – carriers are looking to optimize. Often carriers are willing to accept deadhead miles for a prime rate-paying load. They will do the same to position their trucks in parts of the country where their services are most in demand. This 19.5 percent estimate in deadhead reduction could amount to as much as a 25 percent jump in revenue miles.
Efficiency – doing more with what you have – has been the fuel of human progress. Until recently, deadhead miles have been one of the most stubborn, intractable blockers to efficiency in truck freight. But it’s increasingly obvious that the next two decades won’t look like the last two. New data and new technology mean that we now have the tools to make progress toward real reductions in deadhead.
Editor’s note: Aaron Terrazas is Director of Economic Research at Convoy. Before joining Convoy he was an economist at Zillow and the U.S. Treasury Department.
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