Taxi-style licensing system advocated for port trucking
A licensing system for container truck drivers at U.S. ports could lead to more compensatory rates and a more professional and efficient shuttle transport system, according to two researchers.
An economic strategy of restricting entry to the port drayage business will alleviate the oversupply of drivers and allow those in the field to make a profit and raise industry standards, Douglass B Lee, Jr., a planner at the Department of Transportation’s Volpe Center, said Sunday during a port management session at the Transportation Research Board’s annual conference in Washington.
Drayage drivers in West Coast and other ports are paid low piece rates to move containers to and from local warehouses and rail yards without any adjustment for congestion, night shifts, or delays at the terminal or receiving dock. These independent drivers have typically been unable to seek rate increases or surcharges to cover rising costs such as fuel. By some estimates the cut-throat competition has led ocean carriers, who enjoy antitrust immunity, to collectively set rates that are at least 30 percent below what the actual market would bear in an industry where anybody with an old truck can enter the market. In Southern California, a large percentage of shuttle drivers are legal and illegal immigrants.
Truckers without an adequate income stream are undercapitalized, which means they use older trucks that are less fuel efficient, pollute more, may not have adequate power or meet safety standards, and lack technology such as in-cab computer dispatch or location tracking. Truckers have also unsuccessfully engaged in periodic work slowdowns or stoppages to demand higher pay rates, further adding to the potential unreliability of the supply chain.
Those costs are borne by society in terms of more road congestion, reduced air quality and by customers in terms of shipping delays.
Port authorities should consider adopting a licensing system similar to ones used by cities to regulate the taxi industry. In some cities taxi “medallions” are worth $100,000. The driver can sell the medallion or take it to the bank and borrow money to buy a truck or a taxicab, Lee said.
The medallion “represents the economic value of having this partial monopoly” to carry passengers in the city, he said. A licensing system prevents “gypsy cabs giving rides at half fare,” he said afterwards.
After a damaging strike by container truckers in 2005 at the Port of Vancouver, British Colombia, port officials there instituted a licensing system and set rates to be paid by ocean carriers.
The regulatory system is a way to create some income stream that owner-operators could rely on by allowing them to charge a higher price, Lee explained.
Other options for addressing market inequity include allowing independent truckers to unionize or creating a commission that would set a minimum hourly pay rate for drivers, said Peter F. Swan, assistant professor of logistics and operations management at Penn State University-Harrisburg.
Drivers traditionally have been paid flat rates because there is no incentive for them to get to their destination quickly if they are paid by the hour. But Swan said a new system is possible because truck tracking technology today allows trucking companies and shippers to monitor the status of their drivers.
The researchers said that the supply chain is only as strong as its weakest link, and efficiencies and security practices in the ocean voyage or distribution center can be canceled out by poor delivery performance by truckers.
In an interrelated market, a low truck transport rate affects how other players buy and position their assets, Swan said. Retailers, for example, will locate distribution centers farther away from the port where land is cheap.
“One market may be failing and it can have a dramatic effect throughout the entire system,” Swan said.