Too much of a bad thing?
The driver shortage actually might become a problem
By Avery Vise
Perhaps the biggest open secret in trucking is that everyone wants a driver shortage. Actually, what you really want is for all of your competitors to face a shortage while you completely solve the problem.
Barring a severe spike in diesel prices, driver availability invariably is the top worry during a time of strong freight. In the Randall-Reilly MarketPulse survey for June, 49 percent said driver availability was the top concern. Just what we need, right? For now, perhaps – but the day soon may come for many carriers when the pricing advantages of tight capacity won’t offset the inability to cover loads. Indeed, that’s already happening, according to the comments of one MarketPulse participant in June:
“Freight is strong, and we are achieving reasonable success with rate increases, but we cannot make up the shortfall of capacity with increases in top-line revenue. Therefore, we will need to reduce our overall costs.”
What are the prospects for a solution both in supply and demand?
In theory, there are several ways to increase the number of available drivers. In reality, none of them seem practical in the near term.
Let 18-year-olds drive in interstate commerce. Trucking never will attract enough drivers to satisfy its needs as long as kids can’t go into the industry right after high school. With the appropriate screens and safety monitoring/mitigation technologies, this should be acceptable, but it’s not.
Pay more. While over-the-road driving pays a good wage, it also calls for a greater time commitment than most other “blue-collar” jobs that typically pull from the same labor pool. Paying more could solve the problem – if trucking companies don’t mind giving up their entire margin or more. At some point, freight pricing might rise to reflect a perceived permanent driver shortage, but we aren’t there yet.
Make driving more attractive. Over-the-road trucking simply is not a lifestyle that appeals to most people. If it were more or less a 9-to-5 job at a comparable wage, then carriers might find it easier to get drivers. Slipseating, relays and similar operating models could help, but the freight density required to pull something like that off in a truckload environment remains too challenging for most carriers.
To increase the supply of drivers, the trucking industry is fighting potentially overwhelming demographic trends as well as daunting business fundamentals. Realistically, the most promising solutions lie in reducing the need for drivers.
Liberalize truck size and weight regulations. Don’t hold your breath. There will be tinkering, but it would take a national crisis to enact and implement changes that will make a dent in driver demand.
Buy up capacity. Mathematically, consolidation doesn’t solve the problem because you simply are combining existing capacity. But fewer players chasing the same freight make it more likely that the remaining carriers can fill partial trailers and use capacity more efficiently.
Cooperate with customers. Traditionally, shippers and receivers typically insist that carriers tailor their operations to meet customers’ needs. This dynamic already is changing in progressive carrier-shipper relationships, and it is bound to change more.
Cooperate with competitors. The idea of relying on competitors to cover loads for your customers once was unthinkable to many executives, but operational realities have forced many to adopt a more flexible mindset. Rather than refusing a load or brokering through traditional channels, why not tender it in a controlled environment that today’s information technology allows?
In the end, there’s not much you can do to solve the driver shortage for the entire industry, and you really don’t want to do that anyway. You just want to solve it for a limited number of carriers – yourself included. This might mean rethinking your relationships with customers, competitors and drivers themselves.
– Avery Vise is executive director, trucking research and analysis for Randall-Reilly and senior editor, industry analysis for Commercial Carrier Journal. E-mail firstname.lastname@example.org.
Trucking adds 4,400 jobs in June
May employment numbers revised upward by 3,000
The surge in trucking employment didn’t just resume in June; apparently it never stopped. While May’s job report from the U.S. Department of Labor’s Bureau of Labor Statistics indicated that for-hire trucking companies had added only 100 jobs, the June BLS report revised those numbers to a 3,000-job increase in May and pegged the growth in June over May at 4,400. Since the end of December, payroll employment in trucking is up nearly 27,000, according to the preliminary BLS figures. Since trucking employment bottomed out in March 2010, the industry has added 55,500 jobs.
Job growth in the rest of the economy isn’t so healthy. Nonfarm payroll employment edged up by just 18,000 jobs in June, and the unemployment rate actually ticked higher by one-tenth of a percentage point, according to initial BLS estimates. Modest gains in private employment were offset by 39,000 jobs lost in federal and state governments.
Compared to June 2010, payroll employment in trucking is up 3.9 percent. Total employment in trucking in June was nearly 1.283 million – down 170,500, or 11.7 percent, from peak trucking employment in January 2007. The BLS numbers reflect all payroll employment in for-hire trucking, but they don’t include trucking-related jobs in other industries, such as a truck driver for a private fleet. Nor do the numbers reflect the total amount of hiring since they only include new jobs, not replacements for existing positions.
* The amount of freight carried by the for-hire transportation industry declined 1.8 percent in May from April, falling for the second consecutive month, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics’ Freight Transportation Services Index. Year-over-year, the freight index rose 1.4 percent.
* The monthly Ceridian-UCLA Pulse of Commerce Index rose 1.0 percent in June on a seasonally and workday-adjusted basis, a rebound following declines in the previous two months. Year-over-year, the index rose 2.0 percent.
* Trade using surface transportation between the United States and its North American Free Trade Agreement partners Canada and Mexico was 12.1 percent higher in April 2011 than in April 2010, reaching $73.8 billion, according to the Bureau of Transportation Statistics of the U.S. Department of Transportation.
* YRC Worldwide Inc. obtained commitments for a three-year $400 million asset-based loan facility that would replace its existing asset-backed securitization facility. The Overland Park, Kan.-based company says the commitments comply with agreements reached April 29 with key stakeholders providing for their support of its financial restructuring plan.
* UPS Freight, ABF and Con-way Freight all announced general rate increases averaging 6.9 percent. UPS Freight’s new rates are available to view and download at atltl.upsfreight.com, while ABF customers can view and download the new rates at abf.com and Con-way Freight customers can view the new rates at www.con-way.com/webapp/rating_p_app/RatingStart.jsp.
* The majority (65 percent) of U.S. executives say the economy is their number one concern, followed by fuel costs (23 percent) and health insurance (15 percent), according to Saia Inc.’s 2011 National Trends in Small to Medium-sized Businesses, a nationwide survey of U.S. executives on their motivations and beliefs about economic conditions, budgets and supply chains.
Tonnage index down 2.3% in May
The American Trucking Associations’ advance seasonally adjusted For-Hire Truck Tonnage Index decreased 2.3 percent in May after decreasing a revised 0.6 percent in April. April’s drop was slightly less than the 0.7 percent ATA reported in May, but the latest drop put the adjusted index at 112.3 in May, down from the April level of 114.9.
The nonseasonally adjusted index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, equaled 115.9 in May, which was 2 percent above the previous month. Compared with May 2010, adjusted tonnage climbed 2.7 percent, although this was the smallest year-over-year gain since February 2010. In April, the tonnage index was 4.8 percent above a year earlier.
“Truck tonnage over the last four months shows that the economy definitely hit a soft patch this spring,” says ATA Chief Economist Bob Costello. “With our index falling in three of the last four months totaling 3.7 percent, it is clear why there is some renewed anxiety over the economic recovery.” However, Costello remains cautiously optimistic that freight volumes will improve in the second half of the year along with economic activity. “With oil prices falling and some of the Japan-related auto supply problems ending, I believe this was a soft patch and not a slide back into recession, and we should see better, but not great, economic activity in the months ahead,” he says.
ATA calculates the tonnage index based on surveys from its membership. The report includes month-to-month and year-over-year results, relevant economic comparisons and key financial indicators. The baseline year is 2000.
Manufacturing growth expands in June
Economic activity in the manufacturing sector expanded in June for the 23rd consecutive month, and the overall economy grew for the 25th consecutive month, say the nation’s supply executives in June’s Manufacturing ISM Report On Business. The PMI registered 55.3 percent, an increase of 1.8 percentage points when compared to May’s reading of 53.5 percent.
The component indexes of most interest to trucking companies – New Orders and Production – both increased modestly in June. ISM’s New Orders Index was up 0.6 percent from May. ISM’s Production Index was up 0.5 percent from May.