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Transport Watch: Truck Driver Shortage Looms
Concern over the lack of qualified truck drivers has been a looming transportation problem for the last few years although low shipping demand has masked the problem. Trends suggest a real serious shortage is likely to become a reality sooner rather than later.
Date Posted: 9/1/2012
Concern over the lack of qualified truck drivers has been a looming transportation problem for the last few years although low shipping demand has masked the problem. A recent survey of transportation executives by Transport Capital Partners (TCP) suggests that 93% of carriers are expecting wages to increase, but 71% expect the increase will be less than 5%. Such an incremental increase in driver pay means that there won’t be a rush of new drivers wanting to join the industry. This will only exacerbate driver turnover and recruitment and make the potential of a shortage even more likely if shipping volumes increase over the next few years.
Look for shippers to respond by using more dedicated services as the primary method to insure needed capacity. Thus, the relationship between shipper and carrier is as important as ever. Another major concern is the number of carriers that are teetering on the edge of going out of business. The TCP survey found that the number of carriers looking to sell within the next 18 months is on the rise. Trucking is a difficult business and without adequate margins, the industry has become less attractive to almost one-fifth of the current industry.
Almost 70% of the carriers surveyed expect volumes and rates will increase over the next 12 months. Overall, large carriers are more optimistic than small firms. Historically, over the last few years, expectations have not matched the reality. Rate increases have not materialized and return on investment has been lacking. As a result, carriers are not willing to add capacity. According to the TCP survey, 33% of respondents are not planning on adding capacity and another 38% expect to add less than 5%. This all suggests the looming capacity shortage could become a reality sooner rather than later.
A new report by the American Trucking Association (ATA) forecasts trucking gains. After a significant dip during the Great Recession, and a mild economic recovery, the U.S. freight economy, particularly for trucking, is projected to grow significantly in the years ahead, according to American Trucking Associations’ U.S. Freight Transportation Forecast to 2023.
“The trucking industry continues to dominate the freight transportation industry in terms of both tonnage and revenue, comprising 67% of tonnage and 81% of revenue in 2011,” stated ATA chief economist Bob Costello.
Overall, total freight tonnage is expected to grow by 21% by 2023, and revenue for the freight transportation industry is projected to rise 59% in that same timeframe. Trucking’s share of the tonnage market will rise over 2% to 69.6% by 2023, while the industry’s share of freight revenues will increase to 81.7% from 80.9%. In other surface modes, rail’s overall share of tonnage will fall to 15% in 2023 from 15.7% in the baseline year of 2011. However, intermodal tonnage will rise 6.2% a year between 2012 and 2017, and then 5.4% annually through 2023. Domestic waterborne tonnage will show very modest growth between now and 2023 – growing 1% annually through 2023. Domestic airfreight tonnage is slated to grow over 4% annually during the forecast period.
“We found more and more carriers are considering hiring inexperienced drivers and are turning to truck driver training schools to help them place those drivers,” Costello said. “Demand for new, inexperienced drivers is likely to increase at a faster pace than in the past. Fifty-six percent of truckload fleets we spoke with said while they currently do not hire inexperienced drivers, they are considering hiring these drivers.”
A recent ATA report on the driver situation also found that half of respondents that had their own truck driver training school and closed it in recent years said they would consider reopening the school if they can’t get enough new drivers from their school partners. However, they all said this would be a last resort and that they would prefer not to reopen their schools.
New rest and safety requirements are further limiting the number of hours that existing drivers can make. This trend will continue to add to the problem. CNN recently estimated the current shortage at 200,000 drivers. In a news article on its website, CNN quoted an unnamed trucking consultant who estimated the shortage would increase to 800,000 by 2014.
All of the signs suggest that pallet and lumber companies need to work now to find qualified, stable trucking suppliers who can guarantee volumes. Having a favorable contract with a strong supplier can make a big difference. Or if you operate your own fleet, taking precautions to ensure driver retention is critical.
Although some experts have been warning about driver shortages for the last few years, it appears that the industry could reach a tipping point sooner rather than later. And it is best to be ready in advance. A pallet or lumber operation without the ability to deliver on time is a business casualty waiting to happen.