Squire Transportation (Squire) is a large national truckload (TL) carrier in the United States covering routes going both east-west and north-south. Squire’s average length of haul is 1,200 miles with approximately 10 percent empty miles. Squire runs predominantly single driver tractors hauling 53-foot trailers. For years, Squire has relied on relatively inexpensive diesel fuel and nonunion drivers to keep its operating costs low. The location of its major customers requires either bobtailing tractors (repositioning without pulling trailers) or dead-heading equipment (running tractor-trailers empty) to pick up loads for delivery. These practices worked well when diesel prices were at the $1-per-gallon level.
However, the recent volatility of diesel prices has put a strain on Squire’s operating costs. Drivers must refuel at truck stops where diesel prices are averaging $3 to $4 per gallon. Repositioning equipment is becoming cost prohibitive, but customers demand on-time pickups for on-time deliveries. Although these increasing diesel prices can be passed on to Squire’s customers in the form of fuel surcharges, many customers are beginning to revolt against these rising surcharges. Squire’s management can either accept these higher operating costs, thus reducing their profits, or begin to examine the implementation of regional TL operations.
1. If you were advising Squire’s management team on their impending decision, what would you tell them?
2. Is there an alternative to reduce the impacts of high diesel prices other than to develop regional operations?
3. If not, how would you advise Squire to develop a regional operation?