Mark Bogucki, our general manager in Kansas City, recently announced he would retire at the end of 2015. Since joining C.H. Robinson in September 1979, he has seen tremendous change in the transportation industry. I asked Mark to share some of those memories and other insights gleaned throughout his more than 35 years with the company.
President Jimmy Carter signed the Motor Carrier Act of 1980, which deregulated the trucking industry in the United States. Can you describe how the industry operated prior to full trucking deregulation?
The industry was very regulated in both pricing and entry into the business. Carriers had to follow strict rules surrounding the commodities they could haul, territories they could serve, and rates they could charge.
There were five major groups of carriers.
- Regular route common carrier (RRCC). This group was comprised of what we now refer to as less than truckload (LTL) carriers. These carriers had the authority to haul all commodities, with the exception of household goods, throughout the country. They priced their services based on tariffs without discounts—yes, truckloads of product moved under full tariff. This level of authority was next to impossible to acquire. A person either had to purchase the carrier and get the authority in the transaction or have it passed down through an estate. During this time in history, I do not recall anyone starting a carrier from scratch with RRCC authority. The rates were high enough that they very seldom backhauled product. Everything was priced as a head haul or they bounced their equipment home.
- Irregular route common carrier. These carriers went through the application process with the Interstate Commerce Commission, or ICC, to in order to be granted this authority. They needed customer support, stating there was not adequate capacity on a regular basis. This had to be in writing and published. Once it was published, other carriers had the right to publically object the granting of the authority. Many times, a carrier’s application was rejected. Acceptance was a long process as well, sometimes as long as 6-12 months. Pricing was also based on a published tariff. These carriers often had a very solid customer base in head haul lanes but utilized brokers or third party logistics (3PL) providers to fill empty lanes.
- Contract carriers. Contract carriers operated exactly as the name implies: They contracted with up to seven customers to transport specific commodities in specific lanes. Their rates were negotiated with their customers and were not published. However, most contract carriers enjoyed very high head haul loads. Balancing lanes was their challenge. Many of them utilized brokers or 3PLs to fill empty lanes or deadheaded back to a customer’s facility.
- Private fleets. These fleets were owned by companies to transport their products to the end user. In a regulated world, most of the large manufacturers could own equipment, hire drivers, deliver product, and deadhead home more cost effectively and dependably than hiring for-hire carriers. Many of them would backhaul exempt commodities, but they could not act as one of the above regulated carriers.
- Owner operators. B.J. and the Bear, the CB radio, and country music folklore made the owner operator a legend in the industry. They owned their rig and leased to carriers with the authority they couldn’t afford or justify applying for. These leases were either for a trip or for a specific period of time. The carrier possessing the authority often made as much as 45% of the billed rate, though 25% was the norm.
Brokers and 3PLs operated in a few different ways. Some handled only exempt commodities and could load any of the above carrier groups, though most of their business was done with owner operators, private fleets, and contract carriers. Other acted as agents for common carriers—they would find freight for common carriers, both regular and irregular, and then trip lease it to owner operators if the owning carrier did not have capacity.
What do you mean by an “exempt” commodity?
An exempt commodity was any item deemed so by the ICC and not subject to their jurisdiction for authority and tariffs. The spirit of the definition of an exempt commodity was anything that was time sensitive—like produce, which cannot sustain a long transit time on a truck. Keep in mind that, prior to deregulation, just in time inventory hadn’t even been thought about. Normal transit times for truckload often exceeded two weeks; on time delivery meant just knowing where your truck was.
What was categorized as produce soon grew to include almost all agriculture products, including seeds and other items not normally considered perishable. Dated, printed material, like newspaper advertisements, were also considered exempt, but monthly magazines were not.
How did offices build a base of carriers and customers in the first decade after deregulation?
Many of the private fleets we had been finding backhauls for pre-deregulation became instant targets to become customers, which created a pricing challenge. We had been paying them backhaul rates to get their trucks back to their own freight. When we started quoting them head haul rates to supplement their fleets, there was a substantial spread in the two rates. We had to focus on the operating costs of their fleet versus the cost of hiring C.H. Robinson to move their product.
On the carrier side of the equation, contract carriers were the first to get on board in a big way. They were familiar with soliciting business and making contractual commitments; the new world of deregulation fell right into their wheelhouses. We saw an influx of owner operators, followed by private fleets. Many of the private fleets established wholly owned subsidiaries’ of their parent companies and turned their private fleets from cost centers to profit centers.
What kind of systems and technology did C.H. Robinson use to cover loads in the early and mid-1980s?
We used two telephones with two-inch cables coming out their backs. The phones had 20 plastic keys across the top, one for each line: Two outbound national wide area telephone service (WATS) lines, two inbound national 1-800 number WATS lines, two outbound state WATS lines, two inbound state WATS lines, and the rest were for local and standard long distance calls.
Once a contract was negotiated, a confirmation was typed on a manual typewriter. If a mistake was made, we had to white out every page. These confirmations were mailed, so carriers and customers did not receive them until long after the load was picked up and delivered.