Reducing the impact of the driver and carrier shortage
The driver shortage is upon us. In May 2014 there was an estimated 30,000 unfilled truck-driver positions. This leads to the biggest shipper complaint: “I can’t get trucks.” Carriers are taking rate increases and the spot market pricing is rising even faster than contract rates. Add to that, shippers are being asked to pay repositioning or deadhead fees – essentially bonuses for taking the load. For the first time in years, service levels are down as lane commitments are missed.
Driver Shortage = Truck Shortage = Carrier Shortage = Higher prices
We see the shortage being caused by:
- Hours-of-service regulations from July 1st, 2013 - primarily the 34hr reset - are causing reduced driver productivity & lower real wages (See article)
- Fewer incentives for people to become professional truck drivers as miles/week have dropped by about a third in the past ten years
- Being an over-the-road truck driver is not a good life. Drivers are leaving the industry to find jobs near home and often with comparable wages
Carriers have been reacting accordingly - cutting their fleet size at the same time as they have been increasing recruiting. With driver turnover around 100% and recruiting costs of around $8,000 per driver (average cost as of August 2014), it's not hard to see why some carriers are finding it hard to meet former price commitments.
Fewer carriers, faced with increasing load volume, have put pressure on costs. My old economics professor would be proud!
But the loads have to go
The panacea used to be intermodal. Not any more. Trains are running slower and congestion is rising. Simply put the rails can’t be expected to take up the slack quickly. Add to this, companies are switching from intermodal to over-the-road truck because their just-in-time (JIT) customers are not getting their product on time. This places further pressure on carriers.
Some companies are even pushing more volume to private or dedicated fleets further hurting total carrier capacity as these arrangements traditionally have more wasteful dead-head than for-hire carriers.
Here are some of the areas we can help clients get capacity:
|Find underutilized capacity||For-hire carriers are running around 90% loaded – how can this be made to go to 95% or more? Private fleets often have a much greater opportunity here. Truck capacity is often under utilized. Our sister company Transportation | Warehouse Optimization can often increase truck capacity utilization 4-8% by writing “optimized” orders, including purchase orders. www.warehouseoptimization.com/autoo2 Even on lanes where the customer writes the order, they have been successful at generating significant load-factor improvements.|
|Eliminate shipments||By eliminating the number of moves between production and consumption, for example, shipping directly from then plant, the sheer volume of moves can decline. Similarly in any plant-warehouse campus, how can the product be touched the fewest times? Again talk to our sister company www.warehouseoptimization.com/autoscheduler Product and packaging re-design is an obvious longer-term opportunity|
|Take another look at your network||By adding another warehouse in the North East – a a major B to B shipper was able to use intermodal to position inventory for quick-turn shipments to its customers located there. How can network changes benefit you? Ask us|
|Create an in-house brokerage||Why pay somebody else|
|Get “dibs” on the capacity||My father used to say, “first up, best dressed.” He must have known about tendering truckloads. Some of our team, who used to guide significant over-the-road fleets, tell us that the earlier a shipment is tendered the more likely it is to be accepted. Ask us how, in a world of ever increasing pressure to reduce the lead-time between order placement and receipt, can this be achieved.|
|Buy smart||Lock-in capacity commitments with sufficient incentives|
Work with your legislator
In addition to the need to improve infrastructure (See article), legislation can help trucking in the areas of hours-of-service as well as total payload and equipment size. While government solutions are never fast, they do have a significant role to play.