Got truck drivers?

Discussion
Aug 16, 2018

Stephen Petit

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.

June capped an unprecedented 15-month run of truckload rate increases, according to DAT Solutions, which tracks (non-contract) freight. The national average spot rate for refrigerated loads climbed to $2.69 per mile in June, the highest the company has ever recorded.

“Truckers are experiencing one of the longest sustained periods of pricing power since the industry was deregulated in the 1980s,” said Mark Montague, senior pricing analyst at DAT.

“It’s a good time to have your own fleet for a lot of reasons,” said Brett Biggs, EVP and CFO at Walmart at an investor conference earlier this year. “To have the drivers that we have and the long-tenured associates in that area is so important.”

Indeed, the American Trucking Association estimates that the industry will need to add almost a million new drivers by 2024 to keep up with demand. Considering the tight job market, truck fleets are competing with other industries that can offer more predictable schedules, better pay and less regulatory oversight.

One option? Expand the pool of potential truck drivers, including moves to lower the age requirement to operate heavy trucks in interstate commerce. A new proposed bill would create a graduated license and apprenticeship-style pathway for younger drivers to enter the trucking industry and make interstate moves.

“The truck driver shortage is slowing the movement of commerce in this country, raising consumer prices and wait times for goods,” explained Mark Allen, president of the International Foodservice Distributors Association.

DISCUSSION QUESTIONS: Do you see rising transportation costs as a near- or long-term challenge for the retail industry? Do you see fleet ownership, more predictable delivery schedules or any other ways retailers can offset rising costs?

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9 Comments on "Got truck drivers?"


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Charles Dimov
Guest

Retailers need to brace for the possibility that this is a long-term structural change. Many young workers are probably concerned about the longevity of a trucking career, with self-driving vehicles coming in the next five to 10 years. Retailers need to make sure they have technologies in place like Shipping Rate Brokering (SRB) that finds the lowest cost shipper for the merchandise shipped to customers. The good news about SRB technology is that it is just a good practice for both the short and long term.

Sterling Hawkins
BrainTrust

I’m with Charles here that there’s a structural change happening and retailers would be wise to have the necessary technologies in place. I was talking with my Uber driver in Austin the other day who was formerly a truck driver. His wife thought he was crazy to leave trucking until he started making more than twice the income driving an Uber. Given, he drives a crazy amount of hours a week, but he gets to come home to his family at the end of it every single day. With more gig options for drivers and autonomous technology on the horizon, the future of shipping will look very different than it does today.

Neil Saunders
BrainTrust

Yes, do lower the age at which people can drive a big truck across state lines. 21 is rather high; 18 is fine, as long as proper training and testing have been given.

Even with this change, driver shortages will remain an issue, at least in the short term. Automation will probably take care of the problem in the longer term!

Ron Margulis
BrainTrust

The rail industry is working feverishly to attract grocery and other consumer goods, not only to make up for volume lost due to reduced coal shipments but to diversify the business overall. And they’re having a lot of success. Last year, railroads shipped more than 100 million tons of food and 15 million containers of clothing, sporting goods, home appliances and more.

There was a time when only canned goods and some very stable produce items like carrots and potatoes were shipped by rail. With the advent of bigger box cars that hold four times the weight as a trailer and refrigerated shipping containers that can maintain temperatures on cross-country trips, the growth rate for consumer goods shipped by rail is increasing. The issues facing the trucking business will only drive rail use by CPG suppliers and others higher in coming years.

Scott Norris
Guest

Railroads started seriously investing in capacity upgrades in the late 1990s after decades of neglect, and combined with a technological leap in engine efficiency at the same time, the rewards to rail carriers and intermodal shippers have been spectacular. The Crossrail project in Chicago will remove a significant bottleneck, and ongoing development in air-traffic control style monitoring and communications will enable significantly more traffic to be carried. Even intra-regional rail service is becoming more competitive vis-a-vis trucking (and any AI-style automation that could be used by long-haul trucks will get applied to the more consistent operating environment of rail much sooner.) It’s not just a matter of trucking becoming relatively more expensive, it’s also that rail economics are that much better than they were 20-25 years ago!

Richard J. George, Ph.D.
BrainTrust

This is both a short- and long-term challenge to the food industry. According to Tyson CEO Thomas Hayes, “…freight will be about $270 million more this year than last year.” Refrigerated and organic products have further exacerbated the problem, not to mention impact of fulfilling online orders. All of the noted solutions may bring temporary relief. However, the shortage of drivers is real and will require “out of the box” thinking. For example, the port of Virginia is part of a pilot program for in-transit cold treatment, meaning South American fruits and vegetables can be imported directly to Virginia and then shipped to nearby southern markets versus arriving at a Northeast port to be offloaded and then shipped the extra miles to the south.

Doug Garnett
BrainTrust

This is a sad statement on the strange ways that society guides young people to choose jobs or a positive statement about the health of the U.S. economy — or both.

Given the quality of jobs that compete with trucking, they may have more reliable hours but the pay and stability of trucking as a career is far better.

Fleet ownership is probably a good idea — but in many ways it can reduce the attractiveness of driving for people looking at the career because it brings truckers under the bureaucratic management of a vast corporation.

Ralph Jacobson
Guest

There are several factors in play here. 1.) More jobs than workers. That’s a GREAT problem for the economy. It’s also the case in other industries, like construction and energy. GREAT opportunities for young people, older folks who need to change careers, etc. 2.) Retailers’ logistics costs. Every organization need to do a current network analysis of what makes the most sense for them. Asset management is getting expensive. So leasing, third parties, etc. are only a couple of options to explore. 3.) Shopper expectations. How do you best execute BOPIS, 100 percent store-level in-stock conditions, etc.? These are just some of the factors to consider in this area.

David Naumann
BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
4 years 1 month ago

Transportation costs are significant and can’t be ignored, as they need to be factored into product prices. The trucking industry has changed and will continue to change and most the changes will continue to increase costs. With unemployment levels at an 18-year low, attracting more qualified candidates as possible by looking a different age groups or stages in careers will help, but it won’t solve the problem.

Fleet ownership is a great way to get greater control of shipping and hopefully lower costs, but it is not feasible for small to mid-sized retailers. The best strategy is to optimize product locations to minimize the distance and number of times a product moves before it is in the customers’ hands.

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