owner-operator usage by truckload carriers advantages of using owner-operators limited investment in...
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Owner-Operator Usage by Truckload Carriers
Advantages of Using Owner-Operators
Limited investment in equipment.
The ability to meet peak demands without surplus capacity at off-peak times of the year.
An almost unlimited source of capacity.
A way of coping with the driver shortage.
Permits carriers to test alternative markets with out a significant resource commitment.
Avoidance of certain fixed expenses
Owner-Operator Usage by Truckload Carriers
Disadvantages of Using Owner-Operators
Lower level of company-owned asset utilization (from employing driver teams and related dispatching techniques)
Reduced load matching capabilities and more empty mileage of company-owned vehicles
Drivers typically are less productive, less reliable, and less safe than company drivers
Higher insurance rates
Lower levels of service provided to customers
Firms with company drivers typically are more profitable
Owner-Operator Usage by Truckload Carriers
• Introduction
• Background Literature
• Methodology
• Results
• Conclusions
Overview
Owner-Operator Usage by Truckload Carriers
• Past Predictions About Owner-Operators
• Continued Presence of O-O’s in the Industry
• Purpose of Study – Examine the role that owner-operators play in today’s
trucking industry,
– Assess whether or not firms can expect to prosper by incorporating owner-operators into their operations
Introduction
Owner-Operator Usage by Truckload Carriers
Congressional Support of Owner-Operators
Previous Research
Counter Trends
Background Literature
Owner-Operator Usage by Truckload Carriers
• 1980 Motor Carrier Act
• The Motor Carrier Fuel Cost Equity Act of 2002
• NAFTA Issues
Congressional Support
Owner-Operator Usage by Truckload Carriers
Corsi and Grimm (1987, 1989)Lane (1987)Legg and Larkin (1988)Rakowski (1989)Rakowski, Southern, and Jarrell (1993)Rakowski (1994)Harmatuk (1992)Allen and Liu (1994)McGinnis (1990)Murphy and Hall (1995)
Previous Research
Owner-Operator Usage by Truckload Carriers
• Driver Shortage
• Landstar
• Johnson and Schneider (1990)
Counter Trends
Owner-Operator Usage by Truckload Carriers
Hypotheses
Data Set
Analytical Procedure
Methodology
Owner-Operator Usage by Truckload Carriers
• H1: Use of owner-operators by truckload general freight carriers has not significantly decreased since 1989 (Corsi and Grimm)
• H2: Operating expenses of truckload carriers is not significantly different for firms that use owner-operators than for those that do not (Corsi and Grimm)
• H3: Profitability of truckload carriers is not significantly different for firms that use owner-operators than for those that do not (Corsi and Grimm)
• H4: Revenue per unit of truckload carriers is not significantly different for firms that use owner-operators than for
those that do not (Harmatuck 1992; Allen and Liu 1994)
Methodology
Owner-Operator Usage by Truckload Carriers
TTS Blue Book Data
Class I Carriers
O-O Dependence
Sample Size
T-Tests in Excel
Data Set
Owner-Operator Usage by Truckload Carriers
Table 1Average Percentage of Owner-Operator Use:
1989-1997
Year Use of OO Observations
1989 26.1 1721990 24.7 2161991 20.9 2301992 20.9 2211993 16.9 2681994 15.9 2911995 17.7 3051996 13.5 2831997 17.5 316
Owner-Operator Usage by Truckload Carriers
Perc
enta
ge
Year
1988
35
30
25
20
15
10
5
1992 1994 1996 1998 20001990
Percentage Use of O-O: 1989-1997
Owner-Operator Usage by Truckload Carriers
Owner-Operator Usage
Less than 10% More than 90%
Measure # of Obs Mean # of Obs Mean p-value
Gross Rev 1571 38,700.60 223 50,494.80 0.0320
Total Op Exp 1571 36,749.66 223 48,659.97 0.0237
Net Op Inc 1571 1,948.76 223 1,834.86 0.6740
Net Profit 1571 843.66 223 1,172.57 0.0599
Op Ratio 1571 95.43 223 97.45 0.0000
Net Prft Mgn 1571 2.45 223 1.68 0.0006
Rtn on Eqty 1571 25.13 223 16.26 0.0431
Owner-Operator Usage by Truckload Carriers
Owner-Operator Usage
Less than 10% More than 90%
Measure # of Obs Mean # of Obs Mean p-value
Rev/Mile 1379 1.69 212 2.32 0.4111
Rev/Ton 1248 68.33 199 59.38 0.0544
Rev/Ton-Mile 1234 0.16 200 0.2 0.5379
Exp/Mile 1379 1.62 212 2.27 0.3912
Exp/Ton 1251 69.31 200 88.81 0.5434
Exp/Ton-Mile 1234 0.15 200 0.2 0.5268
Owner-Operator Usage by Truckload Carriers
Owner-Operator Usage
Less than 10% More than 90%
Measure # of Obs Mean # of Obs Mean p-value
Profit/Mile 1379 0.07 212 0.06 0.1363
Profit/Ton 1251 3.47 200 2.64 0.1860
Profit/Ton-Mile 1234 0.01 200 0.01 0.6131
Owner-Operator Usage by Truckload Carriers
• H1 Use of owner-operators by truckload general freight carriers has not significantly decreased since 1989. REJECT
• H2: Operating expenses of truckload carriers is not significantly different for firms that use owner-operators than for those that do not. REJECT
• H3: Profitability of truckload carriers is not significantly different for firms that use owner-operators than for those that do not. REJECT
• H4: Revenue per unit of truckload carriers is not significantly different for firms that use owner-operators than for
those that do not. Possibly Reject
Results vs Hypotheses
Owner-Operator Usage by Truckload Carriers
Supports prediction of Corsi and Grimm
Firms using a high percentage of O-O’s appear to be at a competitive disadvantage
Some Support of Harmatuck (1992) and Allen and Liu (1994)
Conclusions