Trucking and Courier Services
SIC 4210
NAICS 484
The broad category of trucking and courier services includes three distinct subsets: (1) local trucking services, which may include storage facilities; (2) long-distance trucking services; and (3) courier services, except those by air. Many industry firms specialize in just one or two of these areas. A portion of the industry competes with services offered by government-sponsored and private postal delivery services. For more information, see also Postal Services.
Trucking services comprise three broad market sectors: truckload (TL), less-than-truckload (LTL), and small package (courier). In the United States, they also are classified by three general groupings: Interstate Commerce Commission (ICC)-regulated trucking, non-ICC intercity trucking, and non-ICC local trucking. Trucking companies primarily compete amongst themselves, although barge, steamship, railroad, or airline services are regarded as competitors.
After a dismal few years at the turn of the century, the trucking and courier services industry was looking up in 2005, as manufacturers began to produce and ship more freight to meet increasing demand of a growing world marketplace and handle the increasing volume of international trade resulting from improvements in the economies of developing countries and easing of trade barriers. Cost hikes related to the need for higher wages, compliance upgrades, and fuel costs were digging into profits. Consolidation was occurring at a rapid pace, although the industry remained highly fragmented, with the largest players accounting for small percentages of the total market in each country.
Additionally, in order to stay competitive, the trucking industry was evaluating the need to invest in equipment and technology. Intermodal transportation, in which freight is shipped in trailers or containers that can be directly interchanged between trucks, boats, and trains, also was rising as the preferred shipping model across industries. The trucking industry in the mid-2000s was seeing new regulations regarding safety and security, emissions, training, and taxes. By 2005, trucking was still regulated by individual country governments, although in the United States, trucking safety is regulated federally, while licensed and monitored on a state basis.
Truckload (TL) freight is the largest segment in the trucking business in terms of tonnage. These loads, which usually fill an entire truck, primarily are hauled directly from sender to receiver. The freight they haul can range anywhere from raw materials to finished products.
Less-than-truckload (LTL) freight, defined as shipments weighing less than 10,000 pounds, usually goes through a five-step process: local pick-up, sorting at a terminal facility, line haul, sorting at a destination terminal, and local delivery. LTL carrier operations and small package carriers use regional or national networks, sophisticated sorting terminals, and local pick-up and delivery service. Many LTL carriers historically handled packages as a component of their LTL business, but much of this traffic was served by specialized package carriers.
Courier services, also known as small package services, provided by such companies as United Parcel Service (UPS) and Federal Express (FedEx) in the United States, include two- to three-day ground delivery, as well as expedited next-day delivery. Group transportation has played an increasingly important role in small package and express letter services, sometimes termed couriers, thereby blurring the distinction between ground and air services. FedEx, while considered an air carrier for classification purposes, owns and operates an enormous truck fleet, not only for local pick-up and delivery, but also in lieu of aircraft for the line-haul portions of shorter trips. Similarly, UPS utilizes air and rail intermodal services to expedite its traditional ground carrier traffic. Likewise, Roadway Services, a traditional LTL player, operates Roadway Express, which serves both the ground delivery and air express package markets.
The industry is further divided based on driver/ownership: companies that transport goods for payment are for-hire carriers, companies that own its own fleet are private carriers, and individual owner-operators own or lease the tractor (truck) and haul goods using other trailers.
The trucking industry has its roots in Great Britain where, in the 1870s, vans were hauled by steam engines. In 1885 Karl Benz invented a gasoline-powered internal-combustion automobile that spurred the development of a similarly powered load-carrying vehicle produced in 1896 by Gottlieb Daimler. In 1892, Frenchman Maurice Le Blance introduced a steam-powered cartage vehicle specifically for commercial users. The Automobile Club of America staged a contest in 1903 to test the durability and speed of heavy hauling trucks. The event's success resulted in a flourishing industry. By 1908, 4,000 trucks were on the road in the United States. By 1914, the start of World War I, 300,000 were in service; and by the war's end in 1918, a million were in use.
While early trucks resembled horse-drawn wagons, by 1915 they included roofs, roll-down curtains, windshields, doors, and side windows, and by the 1930s most truck cabs were entirely enclosed. The semi-trailer, in which the truck's front end rests on the rear portion of the hauling truck tractor, became commonplace by the 1920s. The early 1930s saw the introduction of the diesel engine. World War I saw a great boost in the trucking industry, with the U.S. Army adding to its fleet at rapid speeds. Trucks continued to develop rapidly given their prominent role in World War II.
Between the late 1920s and the early 1930s, the trucking industry in the United States became dominated by large numbers of itinerant owner-operators. Customers saw the industry becoming more unstable, unreliable, and chaotic. To correct the problem, in 1933 the National Industrial Recovery Act (NRA) was enforced to bring together two organized groups of trucking officials to agree to a code of fair competition. The groups proposed a code in which trucking firms would be subject to maximum hours of labor and minimum wages for all employees. The resulting Motor Carriage Act of 1934 provided for safety regulations of interstate carriers as well as economic regulation of for-hire carriers under the authority of the Interstate Commerce Commission (ICC), a regulatory agency that was formed in the late nineteenth century.
The ICC required that operators of for-hire trucks wishing to carry freight across state lines had to be licensed by the ICC. Licenses were granted only if the need for additional truck capacity could be provided. Cargo types were also limited, with some commodities, such as food, highly restricted. Only farmer cooperative truckers or truckers operating private carriers were exempt. Rate bureaus were formed to research and analyze costs to establish competitive trucking rates. A U.S. Justice Department antitrust exemption gave regulated trucking firms the right to collectively set rates subject to the ICC's approval.
In 1980, the U.S. Congress passed the Motor Carrier Act, a trucking deregulation bill that increased competition among trucking firms by limiting collective rate making, easing entry restrictions, and all but eliminating the ICC's authority to set rates. The act also stimulated competition by allowing unregulated private trucking firms, formerly forbidden to carry other firms' freight, to transport freight from wholly owned subsidiaries of their parent companies. Elimination or modification of the circuitous routing and empty backhauls characteristic of the regulated environment made the trucking industry much more efficient, lowering trucking rates and benefiting both shippers and consumers.
Passage of the bill signaled a major victory for those who had for decades opposed the cartel behavior of the ICC, the trucking industry, and organized labor. Deregulation was estimated to save shippers US$5 billion annually. This legislative act paved the way for new trucking firms to enter the market and set lower rates. The ICC also loosened its route setting and commodities restrictions. While large trucking firms have since faced tough competition, deregulation has resulted in a competitive industry with thousands of new trucking firms in business.
The deregulation wave of the 1980s, however, left the intricate web of controls on U.S. intrastate trucking almost untouched. In all but eight states, restrictions on truck weight and size on interstate highways, combined with prescribed rates and routes, continued to circumscribe the industry. With deregulation, shippers around the world found they could employ the entire gamut of transportation modes to meet their shipping needs. Many manufacturers found trucking to be the most attractive option when production was behind schedule or if low train tunnels along certain routes made shipping certain products by rail impossible. For shippers needing to meet steamship schedules, trucks offered a faster and more flexible option than rail. Additionally, shippers needing to transport small quantities found LTL services appealing. LTL trucking companies could consolidate small shipments from a number of different companies into a single truckload. Prior...
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