Local trucking company was bought. Here is why that matters

Tacoma’s Interstate Distributor Co. was sold earlier this month to Heartland Express, which is based in North Liberty, Iowa.

Unless you work for either trucking company, that news probably doesn’t resonate with you.

But consider the following issues. Collectively, they can affect your back-to-school or holiday shopping sprees, as the industry struggles to retain drivers while facing new pressures and demands from its customers (the stores) and in turn, you.

▪ Turnover in the trucking industry isn’t going away.

The American Trucking Associations, in a statement earlier this month, noted: “In the first three months of the year, the annualized turnover rate at large truckload fleets — those with annual revenues greater than $30 million — rose three percentage points to 74 percent.”

Also: “Despite the increase, it remains at near-historic lows and is 15 points lower than at this time last year.”

▪ Freight delivery pressures persist and are getting worse.

The National Retail Federation’s latest report shows July and August setting up to be record months at the nation’s major retail ports, with a prediction that the August figure could show highest monthly volume since the federation began tracking imports in 2000.

“We’re expecting retailers to import some of the largest volumes of merchandise ever,” Jonathan Gold, the federation’s vice president for Supply Chain and Customs Policy, said in the July 10 report.

That’s a lot of merchandise dependent not only on the ports and air cargo, but also on the nation’s trucking industry to get all that stuff to stores.

And one major retailer, Walmart, is tightening the screws on suppliers, with penalties for items arriving either late or early or packaged incorrectly, part of its initiative to improve the supply flow to its stores. Target has a similar policy, according to Bloomberg Businessweek.

Walmart’s new initiative will start in August.

▪ Automation is on the march to meet demand.

In December, the White House predicted 80 to 100 percent of semi-truck jobs eventually could be lost to automation.

An analysis from the BBC said automation would replace drivers by 2027. Experts speaking July 12 at the Automated Vehicles Symposium in San Francisco were more optimistic, putting the automation’s arrival on highways in as little as three years.

CONSOLIDATION BEFORE AUTOMATION

Consolidation is ahead in the Heartland-Interstate deal, according to an investor presentation on the acquisition, though no details were provided on the number of jobs that might be cut in the consolidation process.

“There’s been a flurry of trucking deals in the last three to six months,” said Burke Smith, managing director in transportation and logistics with Headwaters MB, an investment banking firm. “The over-the-road trucking business is very fragmented.”

Heartland and Interstate have some overlap of operation centers, and plan to consolidate offices and truck terminals. That will save the newly merged companies money in the long run, Smith said.

According to Heartland, “The overlapping Heartland and IDC locations largely will be consolidated over the next 18 months. Regions with overlap of significant facilities include Seattle-Tacoma, Oregon, Southern California, Phoenix and Nashville.”

Heartland and Interstate declined to respond to questions from The News Tribune and referred to Heartland’s news release announcing the deal.

“Administrative, sales and marketing, pricing, recruiting, safety, accounting, information technology, and similar functions will be combined using personnel from both companies to provide seamless service to customers and drivers,” Heartland said in its release.

What about you, the consumer, who likes to find what you’re looking for in stores or online and get free shipping from Amazon?

“There will be no immediate consumer impact as the truckload transportation market is massive and even together these two companies have a relatively small share of that market,” wrote Smith, via email.

“Longer term, consolidation needs to happen in this market to find efficiencies that will support ‘free’ ecommerce shipping. Otherwise retail prices for online purchases will have to go up to support sustainable trucking rates that allow truckers a reasonable profit.”

And, with Walmart’s new push for precise deliveries, the industry is losing time buffers.

Enter the robots.

THE FUTURE AND YOU

Two years ago, Daimler got permission to test a self-driving rig in Nevada. And a semi delivered beer from Budweiser’s Fort Collins-area brewery to Colorado Springs after driving fully automated for 125 miles on a Colorado interstate (but not the city roads).

Meanwhile, Uber’s self-driving freight push is not exactly going smoothly, now caught up in a lawsuit over trade secrets linked to its purchase of Otto last year.

For now, Washington state’s Employment Security Department believes another 510 heavy truck driver jobs will be created statewide by the second quarter of next year.

And, if drivers are still needed in the trucks, not all of the jobs will exactly vanish overnight.

Meanwhile, the automation march, not just in trucking, is giving Elon Musk pause.

Musk, the billionaire CEO of Tesla and SpaceX sees artificial intelligence, unregulated, as a fundamental threat to civilization, with transportation operators on the front line as the first to see jobs go away, which he discussed in an appearance July 15 at the National Governors Association.

Eventually, robots’ skills could be better than all of ours, he believes, with an emphasis on all.

Not just truck drivers.

News Tribune archives contributed to this report.

This story was originally published July 21, 2017 at 2:00 PM with the headline "Local trucking company was bought. Here is why that matters."