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Section 5: Factors Affecting Multifactor Productivity in Trucking
Introduction
Technology and Advances in Technology
Technology is the recipe, the “know-how,” that
is used by producers in different industries in
order to produce a product or deliver a service.
The technology utilized should be the best available
technology, in order to produce a product or
service at the greatest possible level (and quality),
given the available inputs (resources). The production
of a product or service at the maximum level
(given resources) also implies that it is produced at
the lowest possible cost (cost per unit).
The technology of production refers to the mixture,
or factor proportions, of the inputs used in
production, and the ways (or techniques) by which
the inputs are combined—in order to maximize
output. For services (as well as for products), the
main inputs in production are: labor, capital, land,
and intermediate inputs. In practice, there are various
types of these main inputs. For example, the
capital input includes various type of equipment
and structures. The intermediate inputs include
purchased materials, services, and energy inputs
such as petroleum and electricity.
At a point in time, a firm, or an industry or
economy, can maximize its output of a service (or
product) by meeting two conditions: 1) full utilization
of available resources (labor, capital, land,
and intermediate inputs); and 2) by using the best
technology that is available for the delivery of a
service (or the production of a product). In the
case of truck transportation, full utilization of resources
means that trucks are full with freight at
all times, on originating and return trips. It also
means that trucks use roads that minimize any
loss of time due to road congestion, construction,
or accidents. Full utilization of trucks also implies
the minimizing of the out-of-service time of trucks
due to maintenance problems. With respect to
the second requirement, the use of the best available
technology includes the utilization of capital
goods (e.g., equipment, machines) that incorporate
in them the latest technological advances.This
would lead to the highest possible level of
output and, consequently, productivity. Capital
goods can include equipment such as computers,
and software.
When, and if, the level of maximum output is
attained, it can only increase further with additional
increases in resources (labor, capital, land,
and intermediate inputs) and improvements in
technology. Either of these two factors require
the passage of time. Over time, labor can increase
through population growth, which can lead to
higher numbers of labor force in the economy.
Moreover, man-made capital, such as machines
and structures, requires time to be created. In addition,
improvements to the technology used in
production can entail improvements in the quality
of the inputs or by the discovery of new ways
of combining the inputs used in the production
process. Improvements such as these are typically
the result of research and development activity,
which requires time as well as expenditures. That
activity may take place outside the industry that
may eventually be affected. For example, improvements in computers and software can take
place in the computer industry; and, subsequently,
these improved capital inputs can be used in truck
transportation and lead to production increases.
The above effects can be illustrated with a production
possibilities frontier, shown in Figure 2.
The discussion will use an economy for illustrative
purposes; one could substitute an industry or
a firm, and the outcomes shown would still apply.
Let us assume that an economy uses its resources
and makes two outputs: bread and shirts (i.e., food
and clothes). The potential levels of these two outputs
are shown on the two axes of the diagram.
In that case, the production relationship can be
stated as:
Output = depends on (Labor, Capital, Land, Intermediate
Inputs), Technology. The meaning of this
relationship is that the level of output depends on
the amounts of the inputs used in production—
i.e., labor, etc.—and the technology used. “Technology”
is outside the parenthesis; it is not a
physical input like labor and capital, and it can
influence the productivity of the physical inputs.
Its effects are generally incorporated in the MFP
or residual.
The production possibilities frontier (Figure 2)
represents the various combinations of the two
outputs that would result in the maximum level
of (total) output. Point B on the curve shows the
maximum output, which is possible when the
economy is using its resources fully and utilizing
the best available technology. Point A, which is
below B, indicates an output level lower than the
maximum. That level would be attained if the
economy’s resources were not fully utilized. That
could be the result if there was unemployed labor
or capital in the economy due to an economic
recession. That point would also be reached if
firms in the economy did not use the best available
technology and thus did not maximize their
output. That level would also be attained if there
were monopolies in the economy that restricted
output in maximizing their profits.
In order for the economy to move to a higher
production possibilities frontier—i.e., at a higher
level of output, indicated by point C—there would
be need for time to pass. During this passage of
time, it would be possible for resources of the
economy to increase. This would include population
growth and hence growth in labor. Over time,
there could also be an increase in capital—buildings
and equipment—and land. Technology could
also improve over time through the discovery of
new ways of producing raw materials, intermediate
inputs or final products/services.
The above discussion can be applied to the
trucking industry. In that case, the trucking industry
could be thought of as making two types of
output—e.g., the delivery of bread and shirts. The
analysis would follow the same lines as for the
economy. The main point is that for the trucking
industry to deliver the greatest level of transportation
services, there is need to: 1) employ fully the
needed inputs, and 2) use the best available technology.
Also, for the level of output of the trucking
industry to increase, over time, there would be
need to employ more resources and/or improved
technology (including a more efficient industry
structure).
Factors Affecting Changes in MFP of Truck
Transportation
A number of factors can affect changes in multifactor
productivity at the industry level. In the
case of truck transportation, there were increases
and decreases in MFP over the period of analysis,
and these changes can be divided into three
subperiods for assessment: 1) the subperiod of
1987-1995, during which truck MFP increased by
an average annual rate of 2.0%; 2) the subperiod
of 1995-2001, during which truck MFP declined
at an average annual rate of –0.8%; and 3) the
most recent subperiod of 2001-2003, during
which truck MFP increased at an annual rate of
1.1%. Thus, the analysis has the challenging task
of evaluating the factors that resulted in such a
changing pattern of truck MFP.
The factors which have affected changes in
truck MFP—in a positive or negative manner—
include: 1) Improvements in the quality of capital:
computers, software, trucks (information technologies);
2) The efficiency of utilizing intermediate
inputs; this includes the fuel efficiency/inefficiency
of trucks; 3) Average length of haul; 4) Containerization;
and 5) Changes in the structure of the
industry—particularly following truck deregulation
at the interstate and intrastate levels. The text
below examines the effect of these factors over the
period of analysis.12
1) Improvements in the Quality of Capital
There were improvements, over time, in the quality
of capital used in truck transportation. Capital
includes buildings, equipment—such as trucks and
computers—and software. In truck transportation,
there were increases in the capital input over time;
and newer capital is typically more efficient than
older capital, as it incorporates in it improvements
in technology (embodied technical progress).
Table 7 present data on two measurements of
the capital input in truck transportation: capital
and capital per worker. These factors are assessed
for the entire period of analysis (1987-2003) and
for the three subperiods—1987-1995, 1995-2001,
and 2001-2003. According to these calculations,
the capital input increased by 43.4% over the entire
1987-2003 period (column 2). This translates
into an average annual growth rate of 2.3%. With
respect to subperiods, over 1987-1995, capital
used in truck transportation increased by 20.6%
or an annual rate of 2.4%. Over the following
1995-2001 subperiod, capital increased by a higher
annual rate of 3.7%. Then, during the most
recent 2001-2003 subperiod, capital decreased by
-2.2% per annum.
With regard to capital per worker, this ratio
increased by 20.4% over the period of analysis
(column 3), or at an average annual rate of 1.2%.
With respect to subperiods, capital per worker
increased by 1.7% during the 1987-1995 subperiod;
this growth rate declined to 0.9% over the
next 1995-2001 period. During the most recent
2001-2003 subperiod, capital per worker did not
grow.
The increase in capital per worker during 1987-
1995 would have affected increases in truck MFP
through the availability of technological advances
incorporated in new capital goods. As new investment
takes place in an industry, capital investment
of more recent vintage incorporate newer and
more efficient technology as compared to capital
investment of an older vintage. These technological
advances typically contribute positively to
multifactor productivity.
During 1995-2001, there was an increase in
capital per worker while truck MFP decreased
during this period. The decrease can be attributed
to the impact of other factors, which are discussed
at a later point and are listed in Table 14. In the
last subperiod, 2001-2003, capital per worker did
not increase while truck MFP increased. In this
case, MFP increases were affected by other factors
besides technological advances incorporated
in capital.
In order to assess more closely the possible
sources of technological advances through changes
in the capital stock, an assessment is carried
out of more detailed types of capital assets. A
channel through which technological advances
can affect the productivity of truck transportation
is through information technologies. This refers
to the use of computers and computer software
that results in improved delivery of freight. Later
text in this section describes the various types of
information technology used in trucking over the
period of analysis. Consequently, in carrying out
the assessment, data were obtained for these two
variables in truck transportation, as well as data
on capital stock in the form of trucks. These data
are presented in Table 8; they are in the form of
quantity indexes.
These data show the very rapid increases in
the stock of both computers and software used in
truck transportation, over the period of analysis.
Over time, computers grew more than software.
For computers and peripheral equipment, the index
increased significantly from 100 in 1987 to
76023 in 2003. For software, the index also increased
significantly from 100 in 1987 to 44,232
in 2003. In terms of growth rates, the stock of
computers grew at an annual rate of 51.4% over
the period of analysis. They increased at a higher
annual rate of 82.5% during the first subperiod
of 1987-1995. This rate declined to an impressive
30.5% per annum during the second subperiod of
1995-2001. During the most recent 2001-2003
subperiod, computers grew at a still slower rate of
11.8% per annum.
With regard to software, their stock increased
steadily and significantly over time, up to 2000;
it subsequently declined, but was still maintained
at high levels. The pattern for software stock over
time is similar to that of computers. During the
first subperiod, of 1987-1995, the software stock
increased at an annual rate of 93.6%. This was
even higher than the rate of increase for computers.
However, during the second subperiod, 1995-
2001, software grew at a substantially slower,
although still impressive, rate of 15.3%. This rate
declined further to –2.2% during 2001-2003.
A very different picture is obtained for the stock
of trucks. Light trucks (column 3) increased much
slower over the period of analysis than computers
or software; they increased by 17.8% over
the entire 1987-2003 period. In fact, during the
first subperiod (1987-1995), they experienced a
decrease—from 100.0 to 91.5, or about -8.5%. In
terms of growth rates, light trucks increased at an
annual rate of 1.0% over 1987-2003. During the
first subperiod (1987-1995), they actually declined
by –1.1% per annum; during the next 1995-2003
subperiod, they increased at 5.5% per year, while
during the most recent 2001-2003 subperiod, they
decreased at –3.5% per year.
The capital stock of “Other trucks, buses, and
truck trailers” experienced a decline over the entire
1987-2003 period (from 100.0 to 82.7). In
terms of growth rates, during the entire period of
analysis, the capital stock of “Other trucks, etc.”
decreased at an annual rate of -1.2%. During the
first subperiod (1987-1995), their stock increased
by 0.4% per annum. However, this changed to an
annual decline of –1.5% during the 1995-2001
subperiod; the decline continued at the higher rate
of –6.3% during the most recent 2001-2003 subperiod.
In summary, these data indicate the rapid
growth, over the period of analysis, of the two IT related
capital assets—computers and software.
By contrast, the capital stock of trucks either increased
very little or declined over the same period.
Consequently, changes in technology in computers
and software would have been instrumental in affecting
increases in truck MFP during 1987-1995.
Increases in computers during the most recent
2001-2003 subperiod are also consistent with an
increasing truck MFP during that subperiod. Since
computers and software were increasing during
1995-2001 while MFP declined, it would appear
that other factors contributed to the decreases in
truck MFP during the 1995-2001 subperiod. Such
factors are examined in other parts of this study.
2) Information Technologies: Hardware,
Software, and Communications
Technological advances used in truck transportation
include information technologies. These
technologies include the use of computers and
software as well as various channels of communication
such as satellite communications and
the internet. These technologies have affected all
aspects of truck transportation services, including
the operation of the truck, the selection of routes,
truck maintenance, and the marketing of truck
services. These technologies can be used by themselves
or in combination with other IT technologies;
the latter framework seems more typical.
The various information technologies that
affected motor carrier operations include the
following: a) On-board computers (OBC); b)
Electronic data interchange (EDI); c) Automatic
vehicle location (AVL); d). Satellite communications
(SATCOM): e) Computer-aided dispatching
(CAD), and Computer aided routing (CAR); f)
Truck maintenance; and g) Transactions of truck
services (marketing, operations). These technologies
and their impact on trucking productivity are
discussed below.
On-Board Computers (OBCs)
On-board computers are truck-based or handheld
computers, used to obtain information on
truck performance. These computers collect and
process data received from sensors, and other
devices, located on trucks. They keep records
of readings and provide the fleet operator with
performance information on the trucks and drivers.
OBCs can be used as trip recorders and to
monitor drivers’ hours of service and vehicle
performance measures, such as speed and fuel
consumption. OBCs are also used in conjunction
with computer-aided routing and dispatching systems
and with maintenance-scheduling software.
On-board computers also become involved in the
Automatic Vehicle Location system, described
below.
On-board computers can contribute to increased
productivity in the following ways:
Business Transactions. The computer on the
truck registers delivery times of freight and customer
signatures for proof-of-delivery. This has
reduced paperwork and thus labor time to do
such paperwork.
Driver Log. With OBC, drivers can input records
of hours of service and fuel consumption.
Such data make possible an assessment of fuel
utilization, leading to truck speeds that minimize
the use of fuel. Increased efficiency in the use of
fuel, an intermediate input, would increase MFP.
A reduction of total intermediate inputs, in relation
to output, is not observed in trucking over
the period of analysis—except for the last 2 to 3
years. It will be shown that the fuel efficiency in
trucking decreased over the period of analysis.
Data Collection on Vehicle Performance. Onboard-
computers provide information on various
parts of truck performance. These include: engine
idling, braking, and patterns of shifting and acceleration.
The computer also provides data, from
diagnostic systems, on ancillary equipment on the
truck such as refrigeration units. Consequently,
OBCs allow for remote diagnostics prior to a
malfunction of the truck; this can be followed by
preventive maintenance. Prompt preventive maintenance
and repair improve the performance of
trucks and reduce their out-of-service time. This
results in higher levels of output and MFP.
Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) systems include
computers and software that are used to send and
receive electronic messages and data transmission
between computers of two parties. The transmission
can occur between trucking companies and
shippers (or between any two trading partners).
This technology enables the transmission of information,
including electronic transactions, between
companies in an easier, more accurate, and timely
manner. EDI allows for efficient billing and receipt
of freight-delivery acknowledgement.
The use of computers for financial transactions
reduces paperwork and related labor costs, and
thus reduces costs of business transactions. This
increase multifactor productivity.
Automatic Vehicle Location (AVL) and Satellite
Communications (SATCOM)
Automatic vehicle location (AVL) refers to a broad
category of ground-based or satellite technologies,
with which it is possible to track the location of
trucks. Dispatchers, drivers, shippers, and receivers
can track a truck from pickup to delivery of
freight; coordinate inter-modal shipments; and
perform just-in-time deliveries. In addition to
vehicle tracking, SATCOM technologies provide
communication between the dispatchers and the
truck drivers; this allows for real time coordination
of fleet routing and dispatching activities.
With an on-board computer, two-way text or
voice communications can allow for routing and
dispatching of trucks in current time/real time, as
well as the (real-time) monitoring of vehicle operating
parameters such as speed, etc. With this
system, the motor carrier can also locate a truck
in case of a breakdown. This results in less out of-
service time, and thus higher levels of output
(freight delivered) and MFP.
Computer-Aided Routing (CAR) and
Dispatching (CAD)
These technologies involve computer hardware
and specific software that are used for dispatching,
routing, and decision support for route selection
of trucks. Good route selection can contribute to
minimizing the time and cost of moving freight.
These systems are used to schedule drivers and
trucks subject to parameters, such as allowable
driving hours, size of load, and origin and destination.
The basic systems allow for the planning and
scheduling of truck activities prior to the dispatch
of a truck. In addition, more sophisticated systems
allow for routing and dispatch decisions based on
real-time truck locations; estimate delivery times
and distances; help improve cost estimates; and
generate route maps.
The technologies of computer-aided dispatching
(CAD) and computer-aided routing (CAR)
lead to improved fleet routing and dispatching.
This results in an increased utilization of trucks.
This includes a reduction in the number, and extent,
of empty trucks, particularly on back hauls.
This increases trucking output and, consequently,
raises truck productivity and MFP.
Computer-aided dispatching and routing provide
for improved dispatcher productivity. This
technology results in less time needed for truck
carriers’ staff to complete routing procedures as
compared to previous manual systems. These
technologies also improve communication efficiency. With a computerized system, information
to drivers can be relayed instantaneously. Consequently,
information on a pick-up of freight can
be transacted by the truck carrier and the information
relayed quickly to an appropriate truck
driver, who is close to the freight. This results in
increased output (load) for that particular truck,
and greater output for the trucking firm—and for
the trucking industry.
Truck Maintenance
Technological advances have affected positively
truck maintenance through the increased use of
maintenance-tracking software (MTS). These software
improve the maintenance of trucks by tracking
and reordering parts for the repair department
of a truck fleet. These software also carry out
real-time diagnostics of trucks. As information
becomes promptly available on the performance
of trucks, maintenance tracking software is used
to schedule preventive and emergency repairs, as
needed, in the most cost-effective manner. Preventive
maintenance reduces maintenance costs as potential
problems are repaired before they become
bigger and more expensive jobs. This also reduces
the out-of-service time of trucks.
Marketing of Truck Services
There has been an increase in the use of computerized
systems for the buying and selling of truck
transportation services. These include hardware,
software, the internet, and satellite communications.
The result is higher delivered freight output
for the quantity of labor and capital used; this
increases production efficiency/MFP.
In summary, information technology contributed
to productivity in truck transportation in a
number of ways:
On the operations side, computers have been
used for communications between the truck carrier
and the truck drivers. These communications
helped carriers increase vehicle utilization through
increased monitoring and reducing unnecessary
out-of-route miles by drivers. Information availability
on road work or the closing of roads (as
a result of accidents) enables the driver to avoid
the affected roads and choose other routes. These
computers have also been used to schedule trips
by trucks, including which freight to deliver and
which roads to take. Information technologies
would also contribute to lower fuel costs through
improved routing. Improved routing would entail
the choice of the quickest (and lower cost) route
between two points.
On the maintenance side, computers have been
used to schedule regular maintenance checks for
trucks. Computers have also been used to check
for problems developing in trucks. This can prevent
a breakdown of a truck on the road with the
accompanying negative effects of the truck being
out-of-service.
On the administrative side, the use of computers
would include personnel transactions and records.
Personnel information would relate to the
keeping of records for full-time truck drivers and
those on a contractual basis. Since the trucking industry
has had substantial turnover of drivers, the
keeping of correct and updated personnel records
would be of particular importance. On the sales
side, computers have been used to obtain receipts
when the freight is delivered. This entailed
electronic transactions and the electronic dissemination
of such information. Administrative costs fell
as new technologies were adopted that involved
paperless transactions.
Finally, it is noted that the data on computers
and software would not include information
technology equipment utilized on the trucks themselves.
The latter would be part of the truck and
they would have been included in the measurement
of the capital stock for trucks.
3) Intermediate Inputs
An industry’s MFP can also be affected by its
efficiency in utilizing intermediate inputs. In examining
this point, the ratio was calculated of
intermediate inputs to gross output of the trucking
industry, and the results are shown in Table
9. These results indicate that in terms of current
prices, intermediate inputs accounted for about
50% of gross output over the period of analysis
(column 3). Moreover, over time, there was an increase
in the ratio of intermediate inputs to gross
output. Intermediate inputs were 47% of gross industry
output in 1987; in subsequent years, the ratio
increased and reached a high of 56% in 2000.
However, from 2001 to 2003, the ratio declined
(from 55% to 51%).
Since the ratio in current prices could be affected
by increases in the relative price of intermediate
inputs (including fuel), tabulations were also carried
out in quantity terms. These tabulations are
in terms of growth rates, and are shown in Table
9, particularly columns 7 and 8. They support the
results of calculations in current price.
The growth rates in quantity terms indicate
that over the period of analysis, the quantity of
intermediate inputs increased faster than output
of the trucking industry. This is also observed
for the two subperiods of 1987-1995 and 1995-
2001. However, this trend was reversed in 2001,
and over the most recent 2001-2003 period, both
the quantity of output and intermediate inputs
decreases. During that period, intermediate inputs
decreased at a substantially faster rate annual rate
(-7.3%) than output (-3.9%).
Thus, these numbers, in current dollars and in
quantity terms, indicate that there was a decline
in the efficiency with which intermediate inputs
were utilized in trucking, over 1987-1995 and
1995-2001. However, there was an increase in the
efficiency of utilizing intermediate inputs over the
most recent period 2001-2003. The decrease in
the efficiency of utilizing intermediate inputs, during
1995-2001, was a contributory factor to the
declining truck MFP during that period. Also, the
efficiency of utilizing intermediate inputs in truck
transportation was increasing over the last three
years of the period of analysis. This would have
contributed to the increasing MFP during those
years.
In attempting to explain the decrease in efficiency of utilizing intermediate inputs over most
years of the period of analysis, one notes that a
major intermediate input in truck transportation
is fuel. Therefore, an examination is carried out of
fuel efficiency in trucking.
One would expect that improvements in the
capital input of truck transportation would include
the use of newer trucks that incorporate in
them the results of new technologies. These new
technologies would include truck engines that are
more fuel-efficient than older engines. Improvements
in fuel efficiency are expected to result in
reduced use of fuels and consequently of intermediate
inputs. This would contribute to increased
efficiency of the industry in using intermediate
inputs, which would have contributed positively
to truck MFP.
In evaluating such a possibility, data on fuel efficiency are presented in Table 10 and Table 11. Data
in Table 10 are for heavy single-unit trucks; they
indicate that there was a rather steady increase in
the fuel efficiency of these trucks over the 1987-
2002 period. Their fuel efficiency increased over
time from 6.4 miles per gallon (mpg) in 1987 to
7.5 in 2001; it declined slightly to 7.4 mpg in
2002. Calculations with growth rates (in the same
table) show a similar development. Fuel efficiency
of these trucks increased at an annual rate of 0.8%
during 1987-1995; it increased rather substantially
at 1.6% per annum during the 1995-2001
subperiod.
Table 11 presents data on the fuel efficiency of
combination trucks. These trucks use one or more
trailers. Consequently, they would carry greater
and heavier freight than single unit trucks. The
data presented indicate, for one, that these trucks
had lower fuel efficiency than single unit trucks. In
1987, the combination trucks obtained 5.7 miles
per gallon compared to 6.4 miles per gallon for
the single unit trucks. Moreover, the fuel efficiency
of the combination trucks decreased over the period
of analysis, from 5.7 mpg in 1987 to 5.2 mpg
in 2002. That implies a decline of –0.6% per year.
Consequently in 2002, these trucks were even less
fuel-efficient (at 5.2 mpg) than in 1987 (5.7 mpg);
they were also considerably less fuel-efficient than
the single-unit trucks which obtained 7.4 mpg in
2002.
With respect to subperiods, the fuel efficiency
of combination trucks increased by 0.2% annually,
during 1987-1995. However, during the
subsequent subperiod of 1995-2001, their fuel efficiency declined significantly at an annual rate
of -1.2%. This decline in fuel efficiency would
have contributed to the decline in the efficiency
of utilizing intermediate inputs during 1995-2001
(shown in Table 9); it would also have been a contributory
factor in the declining truck MFP during
1995-2001.
Moreover, the number of miles traveled by the
less fuel-efficient combination trucks have been
greater than those traveled by the single-unit
trucks, by rather substantial magnitudes (column
2 of Table 10 and Table 11). Consequently, the fuel
efficiency of the truck transportation industry, in
total, declined over the period of analysis—and
particularly over the last several years of the period.
A declining fuel efficiency is consistent with,
and contributes to, the decrease in the industry’s
efficiency in the utilization of intermediate inputs
observed previously. This, in turn, is consistent
with a declining MFP observed over the 1995-
2001 subperiod.
4) Average Length of Haul
Changes in the average length of haul (ALOH)
can affect multifactor productivity in trucking. An
increase in the average length of haul—affected
by longer truck trips (distance from origin to
destination)—can contribute to better fuel efficiency and an improved utilization of other
intermediate inputs such as engine oil, etc. This
would affect positively the efficiency of utilizing
intermediate inputs which, in turn, affects MFP.
It has already been observed that truck transportation
experienced a decline in the efficiency of
utilizing intermediate inputs, with the exception
of the more recent 2001-2003 period. An objective
of analyzing the average length of haul will
be to assess whether this factor contributed to the
decline in fuel efficiency of the industry or whether
it served as an offsetting factor to that decline.
Table 12 presents data on the average length
of haul (ALOH) of trucks. These numbers indicate
that the average length of haul increased
over the 1985 to 2001 period. This increase took
place steadily over time—so that while in 1985,
the ALOH was 589 kilometers, by 1995, it had
risen to 669 kilometers. By 2001, it had increased
still further to 781 kilometers. In terms of rates
of increase, the average length of haul increased
faster during the more recent 1995-2001 period
(2.6% per year) as compared to the 1985-95 period
(1.3% per year).
The data indicate that increases in the average
length of haul would have contributed positively
to the overall efficiency/MFP of the trucking industry.
With regard to subperiods, the increase
in the ALOH over 1985-1995 would have contributed
to the increase in truck MFP during that
time. During the second subperiod, 1995-2001,
the ALOH of trucks is shown to have increased
while truck MFP declined. During this time, the
ALOH acted to offset the negative impact of other
factors on the declining truck MFP.
5) Containerization
Containerization refers to the movement of
commodities in (large) containers rather than in
smaller units. The use of containers in transportation
includes rail-truck and truck-water transport, and
has become more widespread over time.
Within the continental United States, containers
are used to transport cargo by truck from a point
of origin to a particular destination. They are also
used in the intermodal market, which includes the
transportation of freight by truck to, and from,
a train or a ship. Intermodal firms link different
forms of transportation for ultimate delivery to
the customer. Containers have become an integral
component of intermodal transportation, which
has been expanding over time.
Containers are part of the capital input of the
truck transportation industry. They represent a
technological improvement over previous ways
of transporting freight (use of smaller boxes, etc.)
and are thus an improvement in the quality of
the capital input. The technological advances are
incorporated into the capital input. Thus, the impact
of the use of containers would be measured
in the MFP of the industry.
The use of containers resulted in an increased
use of automation in the loading and unloading
of trucks. Because commodities are in containers,
cargo is moved by crane or forklift; this procedure
requires less manual labor than the handling of
smaller packages. Consequently, the utilization of
this mode of handling freight reduces the time required
to transfer cargo; this increases productivity
and reduces handling costs. The use of containers
also tends to reduce the cost of damage or theft of
freight. The benefits of using containers include:
reduced employee injuries; reduced damage to the
truck; and improvement in loading efficiencies.
Thus, containerization contributes to increased
productivity/MFP.
In order to examine the impact of this factor,
data on containers were collected and tabulated.
It is difficult to find a central source of such data
with a comprehensive data base, for the years that
cover the period of analysis. Consequently, the
basic tabulation uses data on containers from the
railroads, and these data are supplemented with
data from other sources.
Data on containers are presented in Table 13,
for the period 1990-2004. They refer to containers
used in truck-rail intermodal transportation.
These data indicate that the number of containers
used increased by 7.8% per annum over the
1990-2003 period. Moreover, the first subperiod,
1990-1995, has the highest annual growth rate, at
10.0%. This subperiod is similar to the initial subperiod
for truck MFP (1987-1995). The following
subperiod, of 1995-2001, has a substantially
lower growth rate for containers, at 6.1% per annum.
The most recent subperiod, of 2001-2003,
has a growth rate that is higher that the previous
subperiod, at 7.6%.
The rates of increase in the number of containers
used correspond well to the changes in truck MFP.
Truck MFP was increasing during 1987-1995,
while the number of containers used increased at
the highest rate (over 1990-2003) during 1990-
1995. Truck MFP decreased during the following
subperiod, 1995-2001, and the numbers of
container used increased at the lowest rate during
that subperiod. Finally, truck MFP was increasing
again during 2001-2003, and the use of containers
was also increasing during that subperiod.
Additional data on containers are presented in
two appendix tables. These data are consistent
with, and reinforce, the findings based on data in
Table 13. First, Appendix J presents data on containers
used in waterborne trade of the U.S. That
is another segment of the container market and relates
to truck-ship (or ship-truck) transportation.
Although these data cover fewer years than the
rail data, they show similar trends. They indicate
that the increase of shipping containers during the
most recent subperiod, of 2001-2003, was greater
than during the previous subperiod of 1998-2001.
One notes that truck MFP increased during 2001-
2003, while it decreased during 1995-2001.
Finally, another set of data are presented in Appendix
K. These data refer to containers used in
trucks that crossed the border of the United States
for Canada or Mexico. These data indicate a rather
steady increase in the use of containers over the
1996-2002 period (with a decline in 2003). They
also show a pattern similar to that which has been
observed. During the most recent 2001-2003 subperiod,
the use of containers increased substantially
more (at 16.4% annually) than during the
previous 1996-2001 subperiod (0.6%). And truck
MFP also decreased during 1995-2001, while it
increased during 2001-2003.
The data on containers indicate that the use of
containers was a factor that affected efficiency in
truck delivery and truck MFP. The data indicate
high growth of containers use during the 1990-
1995 subperiod (or parts of that period) and
during 2001-2003. By contrast, low increases of
containers use are observed during the 1995-2001
subperiod. Changes in truck MFP corresponds
quite well to changes in containers use: During the
1990 (1987) to 1995 period, and the 2001-2003
period, truck MFP increased; while during 1995-
2001, truck MFP declined.
6) Changes in Industry Structure—
Deregulation
The structure of an industry can change over time as a result of deregulation, mergers/acquisitions, and bankruptcies. Such changes can affect efficiency (productivity) in an industry. With respect to mergers, the acquisition of one firm by another implies that the more efficient firm acquires a less efficient firm. In that case, the more efficient firm has typically grown faster (sales), has gained significant amounts of revenues and profits, and is able to secure financial resources. All of these characteristics enable it to acquire another, less efficient firm. Two types of mergers are relevant to the analysis: horizontal and vertical. A horizontal merger combines two firms in the same industry into one firm. Consequently, in the new post-merger firm, there is expected to be merging of certain functions of the two pre-merger firms; these would include finance, payroll, and advertising. These developments result in the same output being produced but with fewer inputs such as labor, equipment, building space, and materials/ services. This results in a reduction in inputs, and thus costs, and an increase in multifactor productivity. Vertical mergers involve mergers of transportation firms that provide complementary services. The provision of complementary services within the same trucking company can increase efficiency.
The structure of the trucking industry changed considerably over the period of analysis—following deregulation at the interstate level in 1980, and at the intrastate level in 1995. The latter completed deregulation in the trucking industry and made it comprehensive. The Motor Carrier Act of 1980 did not affect restrictions on intrastate commerce; and as time passed, the cost of shipping across state borders widened significantly from the cost of shipping within state borders. In 1994, 41 states still maintained some type of economic regulation over intrastate trucking, and intrastate rates were, on the average, 40 percent higher than rates for interstate freight delivery of the same distance.13 In 1995 the Interstate Commerce Commission Termination Act was passed and it lifted economic regulation from intrastate trucking.
Deregulation—interstate and intrastate—of the trucking industry resulted in significant changes. There was a notable amount of entry in, as well as exit from, trucking. The entry side included the appearance of new truckload (TL) firms, the expansion of less-than-truckload (LTL) firms into new markets, and the emergence of third parties such as brokers. Truckload carriers were no longer restricted to predetermined routes and commodities; some of them merged and consolidated with others to provide national coverage.
The change in truck transportation from interstate deregulation, and which apparently continued after the intrastate deregulation in 1995, resulted in a decrease in the relative importance of less-than-truckload trucking and a corresponding increase in the relative importance of truckload trucking. Data on shipments, in Appendix L, show that in 1989 and early 1990s, the LTL segment of the trucking industry accounted for 39% of total shipments (LTL and TL). In 1998 and subsequent years up to 2003, the relative importance of the LTL segment decreased to 29% of total industry shipments.
While few carriers specializing solely in LTL
trucking were formed since 1980, there was significant
geographic expansion by existing LTL firms
into each other’s territories, and entry by other
carriers, including carriers from other modes (e.g.
rail). These new entrants included newly formed
subsidiaries of existing LTL firms, and the expanded
operations of truckload, small package,
package express, and air cargo carriers.14
A comparison of the status of the 100 largest
motor carriers (of property) between 1979 and
1991 shows that15 : 1) Forty-nine carriers were
operating, 37 of which were still among the 100
largest; and 2) Fifty carriers had ceased operations
since 1979. At least 35 of these carriers were identified as having filed for bankruptcy.
Structural changes in the trucking industry included
trucking companies diversifying out of the
traditional LTL market. For example, Roadway
Services, Inc. was an LTL firm, and it created a
subsidiary (Roberts Transportation Services) that
performed almost no standard LTL business. The
subsidiary was in the business of handling rush
shipments, of rather high value. Much of its revenues
came from shipments that were smaller than
10,000 lbs. (i.e., technically LTL), but these shipments
were not routed through traditional LTL
sort terminals. Rather, most of these shipments
were picked up within 90 minutes of a customer
request and were dispatched directly to their destination.
166
During the period of analysis, the LTL segment
experienced significant decreases in the number of
firms, accompanied by an increase in the size of
the average firm. In 1975, this segment consisted
of about 528 firms (generating $10.6 billion in
revenues). By 1989, the segment had shrunk to
159 firms which had $13.4 billion in revenues;
and by the end of 1993, there were only 108 firms,
generating $16.7 billion in revenues.17 These data
indicate that over the period 1976-1993, there
was a substantial change in the structure of the
LTL segment of the industry and, thus, in the entire
trucking industry.
After interstate deregulation, the LTL firms experienced
mergers and bankruptcies. At the same
time, a number of LTL carriers, particularly, smaller
ones, were able to succeed. From the largest 50
LTL carriers in 1979, twelve companies survived
as of 1994 (controlled by 10 corporate parents).
Of the top 50 firms, a number of firms merged
with others that later closed, while a number of
firms shut down operations. Moreover, more closures
occurred to firms that were relatively smaller
in the group of the top 50 firms. Conversely, more
of the relatively larger firms in the top 50 firms
were able to survive in the post-regulatory environment
(of interstate deregulation).18
With respect to bankruptcies, a number of
bankruptcies took place in the truck transportation
sub-sector. Since efficient companies are
expected to survive and grow over time, and
inefficient companies are less likely to survive,
bankruptcies in truck transportation would tend
to result in increased efficiency (productivity) in
the industry. It would appear that bankruptcies related,
for one, to increased competition from new
industry entrants, typically with lower costs, that
followed deregulation in 1980 and 1995.
It takes several years for the impacts of deregulation
to show in the industry structure and
performance. The positive impacts of deregulation
would include the expansion of efficient
firms in the industry, the entry of new firms that
would need to be competitive—i.e., efficient—and
the exit of inefficient firms from the industry. It
appears that the efficiency of the industry was
affected positively by the comprehensive deregulation
completed in 1995. It would have taken
several years for industry adjustments to take
place—through mergers/acquisitions, etc.—that
would result in increased efficiency in the trucking
industry. It would seem that the impact on higher
efficiency began to be shown during 2001-2003,
during which period truck MFP was increasing
again.
There were adjustments in the industry after the
interstate and intrastate deregulation of trucking.
These two periods of deregulation were probably
a shock to the industry, with existing firms
attempting to expand while new firms were attempting
to enter the industry. One outcome of
the new entrants in the industry was more competition,
which eventually resulted in a number of
(less efficient) firms leaving the industry. In such
circumstances, there is typically need for a period
of time to pass, in order for adjustments to take
place, before the industry reaches some equilibrium
between supply of truck services and demand
for truck services (the former being affected by
the number and type of firms in the industry). It
would seem that industry adjustments had taken
place to a sufficient degree by 2001, and production
efficiency in the industry subsequently began
to increase—as shown by an increase in trucking
MFP.
In conclusion, it appears that changes in the
structure of the (for-hire) trucking industry, as a
result of mergers/acquisitions and bankruptcies,
over 1987-2003, resulted, in general, in increases
of industry efficiency. This would have affected
truck MFP increases, during 1987-1995—after
interstate deregulation—and truck MFP increases
during 2001-2003, after intrastate deregulation.
12 Improvements in the labor force could also affect multifactor productivity in the industry. These improvements include the effects of additional training and education of labor. Lack of appropriate data prevent the direct quantification of this factor. Consequently, its impact would be included in the multifactor productivity.
13 Federal Highway Administration. “Regulation: From Economic Deregulation to Safety Reregulation,” p. 5.
14 Interstate Commerce Commission, 1992, p. 38.
15 Ibid., p. 52.
16 Ibid., pp. 89-91.
17 Feitler, Corsi, and Grimm, 1998, p. 5.
18 Rakowski, 1994.
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