••• SPONSORED SECTION •••
The statistics show the importance of the
transportation, shipping and logistics industry
to the state of North Carolina.
In 2022, North Carolina’s trucking system moved
478 million tons of freight, valued at $741 billion. From 2022 to 2050, freight moved by trucks in North Carolina
is expected to increase 64% by weight and 97% by value.
In addition, North Carolina is served by 17 airports with cargo activity, as reported by the Bureau of Transportation Statistics. And with more than 3,200 miles of track, North Carolina boasts the largest consolidated rail system in the nation. From this rail network, one can ship directly to 22 different states.
Business North Carolina recently gathered leaders from the transportation, shipping and logistics industry to discuss trends and issues.
The discussion was sponsored by:
- Epes Transport Systems, Greensboro
- Guilford Technical Community College, Greensboro
- N.C. Department of Transportation, Greensboro
- N.C. Trucking Association, Raleigh
- Piedmont Triad International Airport, Greensboro
- South Atlantic\Wheelhouse Packaging, Winston-Salem
Executive Editor Chris Roush moderated the roundtable. What follows is an edited transcript.
WHAT IS THE BIGGEST ISSUE RIGHT NOW IN THE INDUSTRY?
PECK: Our biggest issue is just strictly capacity. There’s more capacity than there is goods to move. So it’s a challenge for there to be profitable business and enough to keep drivers and companies busy. It’s a pretty broad statement, but I can’t think of anything bigger right now. And we have to reach a better equilibrium than what has been the last nine months.
BOSSONG: So our biggest challenge is that retail has shifted to just-in-time inventory. And as a result, there is a lot less demand for consumer goods right now. We do see that changing in the near term. And we do see a lot more volatility continuing whether it’s supply-chain oriented or demand oriented.
PENTZ: So my job is to teach students. What I read the most about is overcapacity in North Carolina but also globally. There’s too much production capability. There’s too much transportation capability. And I think that’s a big issue.
FOX: The funding in terms of being able to continue to build infrastructure and then maintain that infrastructure. We’re one of the fastest-growing states – people are going to continue to move here, businesses are going to continue to move here. And so we need to make sure that we have adequate funding to be able to maintain the good infrastructure we have already and continue to grow to keep pace with the growth we’re going to have.
BAKER: Mike already hit upon one of those being having enough funding to do what we all need to do. The state’s commercial service airports combined have something like $300 billion or $400 billion worth of need. And then the other half of it is the planning. Right now the roadway system around here is unbelievable because of decades of planning. And we have assets at the airport that are very strong. But we need to think about 50 years out and 100 years out.
LET’S GET BACK TO THE OVERCAPACITY ISSUE. WHAT DOES THAT MEAN? IS THERE A NEED FOR MORE MERGERS AND ACQUISITIONS IN THE INDUSTRY?
PECK: This business goes through cycles, ups and downs. We’ve been at a low trough point for quite a while. It can’t sustain much more but there are multiple ways you can reach that equilibrium. You can have capacity taken out of it, you can simply have more demand and more goods purchased, transported on trucks or rail or both. So any and all of those might solve it, but there is already some capacity exiting the market.
From a small trucking company standpoint, there’s a lot of independent contractors that are exiting. A lot of those become company drivers. There’s also a lot of small companies that are being absorbed into larger companies. There’s a lot of M&A in it. Right now, the best way is to have enough demand where those goods are priced at a profitable margin for trucking companies or any transportation means.
JULIAN DESCRIBE THE CHANGE TO JUST-IN-TIME DELIVERY AND HOW THAT IMPACTS YOUR BUSINESS.
BOSSONG: Everyone used to have a just-in-time philosophy of inventory management. When COVID came, we saw some significant supply chain issues. Everyone’s shifted into a just-in-case model. I’m going to make sure I have inventory squirreled away in various places in my supply chain. I think this is one of the reasons why we’re seeing overcapacity. Retailers are shifting toward just in time. As they shift, they’re eradicating their inventory and putting the pressure back on the manufacturers or saying we just don’t want this inventory.
The consumer is used to instant gratification. They also have fewer dollars to spend, for economic reasons. They’re saying, “I’m no longer going to buy a year’s worth of toilet paper. I’m going to buy this next week’s worth of toilet paper at the absolute last minute.” So they’re just in time as well. So there’s a lot of inventory that our consumer goods customers are managing their way down. As the just-in-time transition finishes, what we will see happen is everything will come back to equilibrium, and we’ll get back into
growth mode.
MIKE, REGARDING YOUR COMMENT ON INFRASTRUCTURE, ARE WE NOT DOING ENOUGH RIGHT NOW IN THE STATE?
FOX: The needs that have been identified far exceed the amount of funding that we have. And there’s virtually no part of the government where you’re ever going to be able to fully meet that necessarily. But we’d like to get a little closer, particularly given that we anticipate so much growth. Part of the reason that people like to live in the state and they’d like to come here is we have generally good infrastructure. That’s because we planned ahead. And if we don’t continue doing that, then in
20 years, we’re going to have all this growth and people are going to be complaining that the infrastructure’s not caught up.
PECK: I think the praise is not high enough for what the state of North Carolina has done, as opposed to other states we travel in, for planning ahead years ago. Traveling through North Carolina is about as pleasant an experience for a commercial driver as any other state that we go to. Greensboro in particular is a standard by which access to highways and specifically for commercial vehicles is exactly the way you want it. I can name multiple cities and other states where you can’t share that kind of praise.
GREENBERG: I can echo that. In North Carolina, being a part of a federation of trucking associations, we have research arms that are tracking bottlenecks throughout the country. And North Carolina consistently ranks well. We want to keep our interstates off the top 100 bad list. Right now, we’re doing well in that regard.
KAREN, ARE YOU SEEING A DEMAND FROM STUDENTS WHO WANT TO GET INTO THIS INDUSTRY?
PENTZ: I see an increased interest, particularly in the last year where students are calling. Some of them are in another career and they’re interested in supply chain because they hear about the potential to make money. Students are asking for a supply chain job because they want a career that will help them to have a family, be able to buy a home, and be able to live the life they want. That’s what they think supply chain can offer. We want to prepare them to be able to step into a job and do that.
KEVIN, OBVIOUSLY YOUR BUSINESS IS LITTLE BIT DIFFERENT THAN TRUCKING. WHAT DO YOU SEE IN THE NEXT 10 TO 15 YEARS IN TERMS OF AIRLINE SHIPPING?
BAKER: I always say COVID was like throwing a bowling ball into a still pond on a Sunday morning. The ripples go on for the next 10 years. With COVID, what happens to the passenger traffic, it goes to near zero, right? In cargo, everybody all of a sudden was ordering even their food to be delivered by Amazon. So all of a sudden, all the cargo carriers went crazy. But now what you see over the last 16 to 18 months has been a 20% to 30% decline in the level of air cargo. What you’re seeing is a comparison to a spike year. So therefore, it looks a lot worse than it really would have been had you just stayed on a normal growth line.
ARE THERE ANY POSITIVES THAT CAME OUT OF COVID FOR THE INDUSTRY?
GREENBERG: People started talking about supply chain at the Thanksgiving table. People running out of toilet paper started appreciating a little bit about what the industry does. I started joking with the tagline we were essential before essential was cool, right? You look at transportation and trucking – it’s been essential for a long time, over 85% of communities in North Carolina are solely reliant on trucking for getting their goods. I think over 96% of the freight by tonnage has moved on a truck. So we’ve always been essential. I think we’ve appreciated some of the promotion and some of the more widespread understanding at that Thanksgiving table about what transportation does for the state and for the greater economy.
BOSSONG: My son is a senior at Wake Forest, and he has a number of different avenues that he can take. He’s very interested in supply chain, as are a lot of his friends. It’s needed. It’s growing. And it’s not going to go away. AI is going to enable it and put it on steroids and really help it. I think it’s a great opportunity for young aspiring professionals.
EXPAND ON ARTIFICAL INTELLIGENCE. WHAT DOES THAT MEAN FOR TRANSPORTATION LOGISTICS?
BOSSONG: I look at it from a bigger picture on what we’re going to see happening with consumer goods and buyer behavior, not just in the transport arena. We’re going to see a lot more planning around supply chain and logistics. Where’s my inventory? And how do I optimize that? How do I make sure I got the right inventory in the right place before emerging weather patterns? We’re also going to see AI kick in in product development of consumer goods. So we used to have a project that was going to go from concept to retail ready in 12 to 18 months. Now we’re going to start seeing things go from concept to retail ready in weeks. When that happens, it’s going to require a lot more agility on our part to make sure we’re ready because the consumer’s not going to shift in their mindset. They want it right now. We’re going to have to be very agile and have redundancy in place to make sure we can meet their emerging needs.
ARE THERE LOOMING REGULATORY OR GOVERNMENT-RELATED ISSUES TO TRANSPORTATION THAT PEOPLE SHOULD BE THINKING ABOUT?
FOX: A close second to funding is technology. Technology in transportation has been changing ever since the invention of the wheel, and the method by which we power our transportation is clearly evolving. We will have to deal with that, and that also impacts the funding as well because the vast majority of the funding for transportation infrastructure in North Carolina is motor fuels tax. Even if you don’t have an electric car, you might have a hybrid and traditional gasoline-powered cars are getting more fuel efficient with the technology. So that source of revenue is declining. We have to account for that and work toward different methods of funding. Autonomous vehicles will come at some point, and we have to make sure we have the infrastructure to handle those. Can those vehicle’s sensors read the markings on the road?
I WAS IN SAN FRANCISCO IN SEPTEMBER AND SAW AUTONOMOUS DELIVERY CARS, AND IT FREAKED ME OUT. IWAS LIKE, WHERE’S THE DRIVER?
FOX: On a couple of different campuses, they have some little robots that will deliver pizza, and you just see him running around. We’ve got a couple of autonomous shuttles that travel around the state that run a fixed route, and people just get on and get off. And those are well accepted and working well. So I think the future is there.
BAKER: Think of George Jetson’s birthday. The show was set in 2062. And he was 40 years old. Supposedly, the birth date was July 31, 2022. He was flying all over the place. Think of that drone that flies you around. It’s happening. They’re flying right now with people on a trial basis. It’s going to be the next big thing in this industry. It doesn’t necessarily replace the airplanes that fly you from New York to London, but it could replace the plane that’s going to fly you from New York to Boston.
ARE YOU SEEING ANY DIFFERENCE ACROSS THE COUNTRY IN TERMS OF WHAT’S HAPPENING?
GREENBERG: The move toward zero emission vehicles is definitely something that’s concerning the industry, in terms of what the government might be trying to mandate. California is kind of leading the way there. We saw a little bit of that in North Carolina in the last session that was resolved in the budget about whether the OEMs are going to be required to sell a higher percentage of electric trucks.
I think everybody agrees that technology is interesting and exciting. It’s just not there yet. And we’re all concerned about the current freight recession that we’re in. And you can’t really add too many variables in there from a cost standpoint. I think a lot of people see these large trucking companies and think they must be deep pockets, whether it’s for building new roads and bridges or for producing cleaner air. But the reality is, you’ve got a lot of companies that spend $1 to make a nickel. That’s what you’re talking about in terms of operating ratios. And the pressure that you’re seeing to early adopt a technology that is just not viable for most use cases is stressful for the industry in terms of when you look at what an electric truck can do versus what a clean diesel engine can do.
WHAT’S THE LIFESPAN OF AN 18-WHEELER? HOW OFTEN ARE YOU CHANGING OUT AND BUYING NEW TRUCKS?
PECK: For a trailer, 12 to 15 years is a good life cycle, and then there’s an aftermarket for a trailer, but a tractor is anywhere from four to six years.
But here’s a real life example for what would be installed at the 2027 emission standard. Well, those trucks will be purchased in 2026 for the ’27 model year. And in order to get ahead of that, a lot of carriers are discussing a pre-buy
for ’25 model trucks to avoid the
’27 emissions because early indications of those trucks will cost about 20% more than the current trucks.
So there are companies entertaining keeping trucks for seven, eight, nine years before they trade or sell them to try to avoid the early adoption of the ’27 emission standards. A lot of companies got burned from the 2010 emissions standards. People still have scars from that. This ’27 change is probably more costly in dollars, but could be equally impactful.
There are increasing maintenance costs as the truck gets to 400,000 miles. These trucks travel 100,000 miles a year. You have a driver component as well. If you’re trying to recruit the best drivers in the industry, and they come to your company and you have keys to a truck with 800,000 miles on it, you can’t put lipstick on that and make it look good. They want to drive a newer vehicle. So it’s a driver recruiting and retention piece as well.
IS STAFFING AN ISSUE IN TRANSPORTATION AND LOGISTICS?
PECK: That’s the one bright spot right now as drivers are available. Recruiting is going very well. Freight is not keeping up with that. So it’s unfortunately a little bit of a double-edged sword. You can recruit the drivers, but then you can’t keep the drivers because you can’t keep them busy. But recruiting is going as well as it has over the past couple of years. Some of that is drivers that own their own truck that are getting out of it. They can’t do it by themselves.
Insurance costs are too high. Fuel’s too high. And they just want to come to a company and be a company driver versus their own authority. There’s a lot of that going on. But it’s still a transient business. A lot of businesses couldn’t survive on 90% turnover, and that’s what the trucking business deals with.
GREENBERG: The only caveat I would put for it in the industry is for diesel mechanics. Those are still hard to come by. Everybody needs diesel mechanics. It’s probably the only trade where you can have a job probably before you attend your first class. If you enroll in a program, you can have a job as a diesel mechanic in North Carolina and probably in every other state. That demand is real.
WHAT’S THE FORECAST FOR TRANSPORTATION?
GREENBERG: I think we’ll be following a similar model to aviation. I think we’re going to have the person in the seat with a little bit of a different job, but I still think there’s going to be a person in that seat. Because if you could tell me that an 18-wheeler is going to be able to navigate downtown and make those turns without having a person in there, I’m skeptical. You might see more platooning where trucks are communicating more closely and operating more like a train on the road.
PECK: Autopilot has been around for a long time. But every time I get on a plane, I still look to the left to see if there’s a pilot. And I think the same public acceptance of truck driving, looking up and not seeing somebody in the seat, is going to be extremely disruptive and hard to take.
FOX: In this particular region, we’ve sort of developed a hub for transportation technology. You start with the VinFast site where they’re going to make the first electric vehicle autos to be made in North Carolina. And then a little further up is Toyota and its battery site, and then just right out the window there, you’ve got Boom Supersonic manufacturing the first supersonic plane since the Concorde. There’s also Siemens in Lexington building its new version of passenger rail cars. So we’ve got sort of a new tech transportation hub going in North Carolina, which I think is very positive and will keep the state in a leadership position.
PENTZ: A bright spot I think is the interest now as new students are showing up, and the tools that we are introducing to those students that helps them to gain an understanding of how a transportation company operates. We use a lot of simulations. We use a lot of technology, we teach technology in our classes. This past fall, we introduced a transportation management system in our transportation management class. In our warehouse, we have a virtual reality forklift where you put on the headset and turn on the program, and it walks you through how you do a variety of things in a warehouse.
BOSSONG: The bright spot for us is I think we have the forward thinking leadership in place in the state of North Carolina, where we have the right infrastructure in place, the right culture and the workforce in place, and the collaboration across the industry, so that we can meet tomorrow’s needs.
PECK: I couldn’t be happier about being in a state that’s positioned as well as it is. I think the most exciting thing is the image of a truck driver in particular changed over the last couple of years. The image of a truck driver and the image of the industry as a whole has changed. It’s not just turning a wrench and being a grease monkey or driving a truck. There’s a lot more than that. So I’m excited about opportunities to attract people to our industry. And because we’re always going to be essential. I really believe that but it’s refreshing to have that image change. I’m excited to be in an industry that people know now is important. And maybe they want to be a part of that essential status.
LOOKING FORWARD, GIVE ME A BRIGHT SPOT. WHAT ARE YOU EXCITED ABOUT?
BAKER: The changing technology in transportation across the board. Obviously, there’s going to be a long learning curve here and a lot of bumps in the road with the technology. But this does feel like an inflection point in the history of transportation, where things are going to have a major change over to a different way of doing things. And I think that’s pretty cool.
GREENBERG: It feels we’ve kind of found the bottom and we’re on our way for recovery. But other than that, I think the bright spot is just the collaboration that I’m seeing from the industry. It just feels like more stakeholders are sitting around like this, talking about the issues and trying to put our best foot forward, whether it’s solving for infrastructure dollars, doing our best to come up with creative ways of making sure that we’ve got good roads and bridges, because that’s the workforce and workplace for our professional drivers. Sometimes it takes tough challenges to bring those folks together to try to work collectively to solve this problem. ■ 