“There’s a tsunami coming,” Robert Low, president and founder of Prime Inc., told attendees during a panel discussion at the Truckload Carriers Association annual meeting in San Diego this week. Low referred to a looming driver shortage that will keep capacity tight and force rates up.
“But what is a higher rate going to do for you if you can’t get a driver?” he asked.
Low and panelists Richard Stocking, president and chief operating officer of Swift Transportation, and Kevin Knight, president and chief executive officer of Knight Transportation, agreed that the ability to hire qualified drivers is the biggest challenge carriers face. The panel was moderated by Todd Amen, president of financial services firm ATBS.
Factors such as the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program and the possibility of mandatory electronic onboard recorders will shrink the pool of drivers further, panelists said. They also agreed that drivers don’t earn enough to compensate them for the difficulties of life on the road. “Drivers need predictability in their lives, in their home time and their paycheck,” Stocking said.
The industry has “really taken a step back” from progress it had made on rates and driver compensation during the years leading up to 2005-2006, Knight said. Carriers were getting paid to sit and passed rate increases on to drivers.
“If we aren’t able to make investments in our driver force and our equipment, we quickly won’t have the leading transportation system in the world,” he said. “Everything that got delayed is going to have to get caught up. We have to stay dedicated to the cause of our drivers.”
Low and Stocking spoke positively about the long-term viability of using leased owner-operators to meet their capacity needs. The way carriers compensate owner-operators is “a natural incentive program,” Low said. Prime pays 72 percent of a load’s revenue to the owner-operator. “Our philosophy has been that if 72 percent doesn’t produce good earnings for the owner-operator, we don’t need another truck,” he said.
Having “skin in the game” is what drives owner-operators to be successful, panelists said. “They have a business-owner mentality, so they run more miles,” said Stocking. His fleet, Swift, runs about 4,000 owner-operators, and he said they not only work harder, but they watch costs more closely.
“Getting the worker to understand the concept of costs in a business is very powerful in terms of running an efficient business,” Low said. “If that owner-operator is getting 8 miles per gallon, it’s not just a fuel bonus to him.”
As for the increased scrutiny independent contractors face from state and federal governments seeking to reclassify them as employees, panelists agreed that there are many things carriers can do – such as allow owner-operators to turn down loads – to make themselves less susceptible.
“I think there’s enough of a wall there and an opportunity to show government the differences,” Stocking said. But in case that should fail, “we better have a Plan B that’s viable.”
If finding drivers is the biggest challenge for carriers, the biggest opportunity for the industry “is to not be asleep,” Stocking said. “When times are good, you have a responsibility to continue to refine and align and not get fat and sassy, but to really buckle down. This is a cycle, and it will turn down again,” he said.
But until then: “Now is a great time to be a trucker,” Low said.