Swift Transportation, the largest U.S. truckload carrier, estimated that changes to the hours-of-service rules on July 1 has reduced equipment utilization by about 2 percent year-on-year, according to a note from the investment bank Stifel.
The note chronicles meetings between Swift’s executive team and members of Stifel’s transportation and logistics research group.
Swift explained the reduction in capacity stems from drivers taking more than 30 minutes during their rest break to get back to the truck, as well as drivers starting their 34-hour restart at an inopportune time.
“With additional driver training, (Swift) management believes that much of the lost utilization can be recovered,” Stifel said.
Swift also indicated driver supply and turnover remain manageable.
“By creating a career path for drivers and a pay for performance-based compensation system (note: performance includes productivity, on-time pick-ups and deliveries, fuel efficiency, and accident avoidance) the company endeavors to continue reducing its driver turnover ratio,” the Stifel note said. “Currently its driver turnover ratio sits roughly 30 percentage points below the truckload industry average—97 percent for large truckload carriers in 1Q13. Nonetheless, the company would like to drive its turnover ratio down to about 30 percent over the long-term.”
Meanwhile, Swift is tracking toward internal growth targets in the truckload sector – it said in spring that it intended to grow its truckload business by an incremental $1 billion in annual revenue while building $1 billion per year logistics and intermodal businesses.
“Swift achieved half of its truckload sector growth objective this summer, when it announced the acquisition of Central Refrigerated,” Stifel said. “This acquisition vaulted Swift into the number two position in the temperature controlled truckload niche (behind only industry leader, C. R. England). The intermodal growth should materialize now that the company has secured the services of Steve Van Kirk, who joined the company about a year ago from Schneider National. We believe Mr. Van Kirk's operational focus was just what the doctor ordered to bring Swift's intermodal operating ratio quickly into the mid-90s and ultimately into the low 90s.
“The logistics unit is experiencing solid growth in brokerage and transportation management. Modern, tailored systems are in place for both brokerage and transportation management, which should allow the logistics unit to continue growing faster than the truckload market for the foreseeable future,” Stifel said.