Tag: trucking

OM in the News: Mexican Truck Drivers and the Supply Chain

July 6, 2011 marked the resolution of a long-simmering NAFTA dispute between the US and Mexico over long-haul, cross-border trucking. Although NAFTA came into effect 17 years ago, the trucking deal was still bogged down over two legitimate issues: (1) border security and (2) union and independent trucker opposition to the loss of high-paying jobs to lower-priced Mexican drivers (who earn about 1/2 of their US counterparts).

Businessweek (July 20-27, 2011) reports that transporting goods across the Mexican border is a complicated business, involving customs brokers, warehouses, and lengthy inspections for drugs and illegal immigrants. Under the current system, Mexican trucks haul their merchandise to the border, where a transfer truck takes it across. A US truck picks it up on our side. In time, a Mexican driver will be able to haul goods from any Mexican city straight through to Chicago or New York. To qualify for service on US roads, Mexican drivers will have to learn rudimentary English and US highway laws.

Is it a good trade-off?  Businessweek strongly endorses the idea. With trade among Canada, Mexico, and the US at$1 trillion (triple since the start of NAFTA), the magazine writes: “US potato farmers, along with producers of pork, cheese, and other goods, can look forward to reduced Mexican tariffs with the resolution of the trucking deal. Higher wages and wider prosperity in Mexico are very much in the US national interest”.

US truckers will strongly disagree. While Mexican drivers will surely benefit, American drivers are loath to travel into Mexico. The country lacks the smooth roads, fuel stations, and accommodations available in the US–and has violent drug gangs to boot. In effect, the trade-off balances a more efficient supply chain with the disruption of workers in this industry. It’s no wonder the Obama administration announced the agreement with little fanfare.

Discussion questions:

1. Is the lower transportation cost good, or bad, for OM?

2. How does this change impact the supply chains served by the truckers?

OM in the News: Technology Puts the Brakes on Truckers

Who doesn’t remember the romantic age of the US trucking industry? Powered by cheap diesel, drivers could do pretty much as they pleased on the open road. The days of open-throttles were made famous by Bert Reynolds’ 1977 movie, “Smokey and the Bandit”. Using his CB radio to skirt police traps, the  hero shreds speed limits on a cross-country beer run. Well, those days are gone.

The Wall Street Journal’s article (July 11,2011), “Firms Put Brakes on Truckers”, describes the technology trucking companies are using to wring better fuel economy from their fleets.  Firms are putting computerized governors on trucks’ engines, cutting top speeds from 70 mph to 65 mph. Titan Transfer is even paying bonuses to drivers who get the best fuel economy–and chewing out drivers who don’t. Every decline of 5 mph improves an 18-wheeler’s fuel use by 1/2 mile per gallon–big savings to the shippers.

Today, a driver’s every move is electronically recorded and relayed back to dispatch centers. The black box in the cab is wired to a satellite dish near the roof that beams the truck’s location, its speed, and even what gear it’s in back to the company in real-time. When one driver tried to shift into neutral going down a hill, to override the truck’s governor, a red light immediately flashed telling him to pull over and call HQ for a tongue-lashing.

Drivers, understandably, are not happy about covering less distance each day, as they are paid by the mile. This cuts take-home pay and makes the old-time,  cross-country run stretch from 3 days (at 80 mph) to 4 or 5 days. But even some reluctant drivers agree that 65 mph saves not only fuel, but lives.

Discussion questions:

1. What are other ways that technology can help make the trucking industry more efficient?

2. Make the case, from the driver’s perspective, why the changes are not efficient.