Oean carriers are redeploying ships from lower-paying to higher-paying routes, leaving some with no way to transport their goods. The article explains how ships are being reassigned, leaving too few ships on a route to keep the schedule going. Give it a look!
Currently, they are adding ships to the Asia-US routes which charge over $10,000 per container. They are leaving routes that charge on the order of $2000 per container.
You can see why they are doing it. They can get away with it because ships are only bound by the laws of the country they are flagged in. Most of these laws are weak. Port countries do have some say, but only the major world port countries can do much to change the behavior of the liners. And they would favor more ships for their key routes.
So this is news for the West Coast; there aren’t many 1M teu container ports there. But guess the location: Coos Bay, OR.
Coos Bay is a lovely oceanside town, a favorite with retirees and nature lovers. A friend of mine recently moved there.
The folks there aren’t going to be wild about a big container port, with all the trucks jamming up the highways and the air and other pollution being spread. In fairness, the plan does include rail to the port, which should reduce the need for drayage trucks. But it won’t eliminate them.
You think we have a driver shortage in the US? In the UK it is even worse.
When we can’t get milkshakes, maybe we can get carriers to pay more to drivers, or change work rules so they can be fairly compensated.
In short term economics of the situation, shippers are always working out on carriers for lower prices. It’s the single factor they care about most. Whether that is what they should be concerned about is a different question; it’s reality. Carriers (trucking companies and owner-operators) have only limited control over their expenses– fuel, which is proportional to distance and delay time), labor costs, and relatively longer term costs such as truck lease payments and insurance. Note that truckers can often get the shipper to pay trailer or container chassis costs; otherwise those are also short term.
The only one ofthese within easy control is labor costs– wages for the driver and any benefits they get. Employee drivers usually get an hourly wage and some benefits like medical insurance, retirement benefits etc. Owner-operators get a piece rate for theload they carry, and must pay their benefits themselves out of the receipts.
So the easy short term way for carriers to squeeze cost out is to keep wages low for employees, or negotiate lower piece rates for owner-operators. They are likely to resist raising rates to drivers, even if they can raise prices to the shipper for hauling their cargo.
How can drivers earn more? They can jump to a different firm. Owner-operators can refuse low-paying loads,and in the extreme simply park their truck, taking themselves out of the labor market for trucking logistics. This is called job mobility in the language of labor economics. That results in fewer people seeking this kind of job. In the US, over half the drivers are owner-operators rather than employees, but the fraction varies in different segments of trucking. In the UK, more drivers are employees.
How can trucking firms react to the shortage? It’s actually simple– pay more! Drivers do a difficult job, that requires some skill and a reliable attitude. Maybe it’s worth more than carriers are currently paying.
Supply Chain and Logistics 