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Letter from Ed: Transportation Is a Growing Challenge in the Pallet Industry
Pallet Enterprise founder, Ed Brindley, talks about the looming truck driver shortage, the causes and what companies can do to prepare.
By Edward C. Brindley, Jr., Ph.D. President
Date Posted: 6/1/2014
The pallet industry faces a number of challenges, including finding enough qualified people to fill positions, tight margins and lumber availability. When looking over the many challenges we have, one that has been around for a long time and has risen near the top lately is transportation.
Think about it for a minute. With the exception of labor, few challenges are as universal as transportation. Like our country, the pallet industry moves over the roads via trucks. Some lumber moves by rail, but our industry mostly moves by trucks including both raw materials and finished goods.
Most hardwood lumber is delivered from mills that are reasonably close to our plants. Depending upon what part of the country you are in, some softwood may move by rail or occasionally by water, but most travels via the road network. Some pallet companies have their own trucks, but many use common carriers. You often find yourselves competing with people in entirely different industries, many of them seasonal like Christmas items, certain retail goods or produce.
Many pallet companies find trucks difficult to get. This is not a new development. It has been true for a long time, but that doesn’t make it any easier to face. And the challenge is getting worse. And unfortunately, our products are heavy and bulky, and we pay relatively low freight rates when compared with many other industries. Some truck drivers leave the open road and work other jobs, such as construction during the spring and summer months.
The core issue is a lack of truck drivers. Last year, the shortfall was 25,000 drivers. The Bureau of Labor Statistics (BLS) projects that trucking jobs will grow by 11% from 2012 to 2022. As the economy grows, the demand for goods will increase, and more truck drivers will be needed to keep supply chains moving.
The BLS also states that the average age of a commercial driver in the U.S. is 48. With many truckers facing retirement, long-haul carriers are scrambling to fill spots. You might have heard one of the many ads for carriers seeking drivers on either the radio or television.
Driving a truck is a grueling, somewhat thankless job. The pay is not really all that good. Long distance drivers may earn in the range of $50,000 to $60,000. According to the BLS, the average income for a truck driver was only $38,000 in 2012. Laws reducing the number of hours a truck driver can work have impacted the amount that a truck driver can earn, which will probably further restrict the future availability of drivers.
It seems that truck driver has been added to the list of jobs that many Americans don’t want to do because of the long hours and periods of time away from home.
Oil field jobs have offered employment options for lower skilled workers competing with all aspects of the forest products industry. The need for drivers has grown while the supply is depressed. One article reinforced this issue by saying that there is not a shortage of truckers, just a shortage of good opportunities to attract them. The pay is not attractive and the lack of respect by both shippers and receivers depresses the interest level. The driver turnover rate is reportedly close to 100% a year.
Many are independent truckers, which makes their jobs fairly insecure. The demand has grown while the driver pipeline is restricted. The newer generation is generally not attracted to the road. Historically, many people who moved into the driving profession came off the farm, but that pool is dwindling as well.
Owner operators are not entitled to such benefits as workers compensation which just adds to driver insecurity. Personnel not covered by unemployment insurance made up 23.5% to the 2010 workforce, up from 19% in 2001. As one reporter put it, “independence has become shorthand for earning less.”
The Federal Travel Regulation released its trucking conditions index in March which increased from 7.54 in February to 8.69 in March, which reflected an extremely tight capacity in the truckload sector. Jonathan Starks, FTR’s director of transportation analysis, said, “Truckers should be feeling much better now that they have finally been able to use the ever tightening truck supply to get much needed rate gains.” This sounds a little like the pallet industry which has been using higher lumber prices and a restricted supply to justify the need for higher pallet prices. Higher freight rates are probably one of the elements that have contributed to higher lumber rates so many pallet companies are trying to pass them along in their higher pallet prices. If you are not using this as a logical part of your argument for higher pallet prices, you might consider it as one of your points for justification.
It appears that higher freight costs are here for now and may linger on for the foreseeable future. Smart pallet and lumber companies will make logistics and transportation a core capability by controlling its own fleet and working with reliable trucking partners when necessary. Effective management of backhauls and reducing wasted return trips is also important. Remember, nobody pays you to haul air.
When it comes to attracting drivers, you may have to increase pay, upgrade equipment, offer better schedules or improve benefits. Also, if you want to attract young drivers, realize that the marketing methods used to reach their parents may not work for those under 30. Find out why drivers are leaving and make changes to address their concerns.
The list of pallet industry challenges continues to march on with freight issues definitely being one of the major concerns that will become even more important in the future.