Driving A Fine Line
In June, the entire U.S. economy added just 18,000 net new jobs and 4,400 of them were in the trucking industry, according to estimates. Only eight other industries produced more new jobs that month.
That sounds like healthy growth for trucking, but it appears the industry could have grown even more had it been able to find more drivers.
Almost half of the participants in the monthly Randall-Reilly MarketPulse survey of trucking executives identified driver availability as their No. 1 concern in June. That’s not necessarily a bad thing.
Savvy carriers value a mild-to-moderate driver shortage of some degree to keep capacity tight and freight rates strong — or at least as strong as possible. But it’s conceivable that the shortage could not only constrain growth but also threaten carriers’ bottom lines.
Consider this comment from the June MarketPulse survey: “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.”
Most people don’t take these worries too seriously because they think the market will solve the problem. That’s probably true, but the market could solve the problem by sending more freight to rail and other modes or simply by encouraging shippers to be slightly less time-sensitive. A market-based solution doesn’t necessarily involve more drivers or more trucks.
The trucking industry does seem to face one huge long-term problem: A tightening of the American labor market. It sounds silly with unemployment topping nine percent to discuss a labor shortage, but the trends are inevitable.
Once the economy stabilizes, expect retirements to rise sharply. Plus, you can’t outsource trucking to employees in another country. Assuming the politics will allow it — and that’s a big assumption — immigration could help fill the gap, but it probably won’t be enough.
A severe driver shortage would curtail fleet growth and send longer-haul freight to railroads, potentially allowing trucks to run longer in years. That’s not great news for parts suppliers and service providers. The up cycles that helped make the down cycles more tolerable might not be as strong in the future.
A driver shortage represents challenges for your business.
Another likely consequence will be more mergers as carriers try to guarantee their own capacity. This, too, could present some challenges for you. For starters, you could find that long-time customers aren’t your customers anymore because their new corporate parents have different parts and service relationships.
Service providers potentially face a separate threat in a merger if one of the merger partners has significant maintenance facilities the other lacked.
Even in the absence of mergers, expect greater cooperation among trucking companies. Many carriers already use information systems that allow them to share loads seamlessly. How long will it before those same carriers start to integrate their maintenance functions in order to reduce costs and increase technician utilization?
Something else to watch: Spec’ing changes. In automobiles, the manual transmission is largely a relic of the past except for high-performance cars. Facing a generational shift, how long will it be before fleets also make the clutch pedal and multi-gear shifter a thing of the past?
And will tomorrow’s drivers really care about chrome bumpers? Aerodynamic styling is now almost universal, day cabs as alternatives to sleepers could become the next big trend.
Obviously, as long as there are trucks, there will be parts and service. Trucking will remain the dominant form of freight transportation for many decades; only reliable teleportation can replace it fully. So there’s no need to panic. But perhaps it is time to rethink your long-term business plans and start paying even more attention to what’s happening at your most important customers.
Avery Vise is executive director, trucking research and analysis for Randall-Reilly Business Media and Information.