In an effort to extend the life of companies in Southern California, Vic LaRosa, president of trucking company TTSI, said at a meeting of the Toy Industry Association that more industry consolidation is necessary to create trucking companies that thrive.

The industry, he said, needs fewer, larger, better-capitalized companies: “We need more consolidation in the industry,” he was quoted as saying in an article at joc.com. The article speculates that while he was speaking specifically about Southern California, his comments probably apply to other major U.S. ports as well.

The article does not further quote LaRosa, but summarizes his comments at the meeting in great detail. LaRosa added that even the largest U.S. port complex and intermodal rail yards do not create enough business to support the 800 drayage companies the area currently holds. Consumer demand is pointing to lower prices, and that is driving retailers and “beneficial cargo owners” to look to shipping companies to provide lower freight rates to make up for those lower prices.

The carriers, in turn, demand lower prices from terminal operators, who then make up for that shortfall by cutting corners and under-staffing container yard and gate operations.

While that is happening, marine terminals are operating on some of the most expensive land in the country, and incur some of the highest labor costs through the International Longshore and Warehouse Union. This creates a difficult situation under which something has got to give.

There are currently hundreds of smaller harbor drayage companies in Southern California, and their small size and internal competition gives the companies little to no leverage and bargaining power with BCOs.

“The biggest problem for our industry is the low barrier to entry,” he said. Dozens of truckers that can not compete on service attempt to compete on price,” LaRosa said.

That means if a customer is unhappy with the pricing the drayage company is commanding, they can simply move to one of the other companies, who will gladly meet or beat the price of their competitor. LaRosa said with decreased competition and increased collaboration and consolidation, the companies can form larger companies and create more leverage on pricing and take back some measure of control.

Plus, these smaller companies, which often only operate a small number of trucks, have neither the breadth nor the depth to provide the proper services to BCOs and still be able to turn a profit. LaRosa noted that a harbor drayage company that has 35 or fewer trucks “is cutting somewhere.”

In addition, LaRosa warned BCOs that merely moving toward lower prices in marine terminals and harbor drayage companies is not the wisest course of business. Lower rates can mask unforeseen expenses down the line: “you’re paying for it somewhere else,” he noted.

LaRosa offers as a solution to this regional industry-wide problem is to consolidate drayage companies, lowering the number of companies, but increasing the number of trucks each company has. “The cargo volumes at present can not support 800 motor carriers,” the article states, “although the number of trucks—about 10,000—is probably a good number for a port complex that handles 15 million 20-foot container units a year.”

Motor carriers that call directly at marine terminals and dray the containers to truckers’ depots and other off-dock sites should merge, LaRosa continued. This would reduce gate congestion at the terminals. When the containers are delivered to off-dock holding areas, BCO can send house truckers to pick up their loads at the off-dock sites, which can often remain open 24 hours a day, increasing productivity significantly.

Finally, LaRosa discussed chassis, which is another area he identified that the trucking industry can directly affect its own operations. When carriers sold most of their chassis to equipment-leasing companies last year, LaRosa said, the result was shortages and dislocations, and truckers had difficulty properly serving their customers.

“Chassis control must be in the hands of the truckers,” he said.

LaRosa said he believes marine terminals are primed and ready to consolidate, and that the resulting companies would be better able to support the recent dray-offs and free-flow operations that are catching on in SoCal.

For more on this story, read the entire article here.