All of a sudden, it seems, used trucks are losing value. It could be because some truckers are finding the trucking business hard to make a living in right now. Spot rates for cargo have fallen recently. Sometimes they are even below contract rates for recently negotiated contracts.
I think the recession is starting to hit trucking. Inventories of many firms are fully stocked, and if business sales slows these firms won’t need to replenish so fast. Hence less trucking needed.
Some of the hot spots for truckers, like the West Coast ports, are starting to slow down also, so less drayage or off-port hauling is needed. There are just fewer loads available.
It’s a good sign for supply chain congestion, but not so good for those who recently entered the business.
So truckers are selling their rigs more frequently.
C. H. Robinson is a well-established third-party logistics company, with close ties to academic communities of logistics experts, as well as broad contacts in the field. Their 2020 Annual Report shows revenues over $16 billion, and a $2.4 billion profit. Their main businesses are North American surface transportation and global forwarding. They are the largest less-than-truckload 3PL in the US.
Clearly they have expertise in trucking, and a need to know what’s going on in the area. In this article they asked Jason Miller, a Logistics professor at Michigan State University, to talk about why trucking capacity is so tight.
He offers two reasons.
First, the pandemic surge was very disruptive to trucking, more than we think. It’s not just the COVID impact itself, and the loss of time, and it’s not just the ‘driver shortage’. it’s the fact that drivers started changing jobs to find positions safer and more conducive to a lifestyle they find more comfortable. Retention of drivers became a big problem. My research too indicates that turnover at trucking firms reached as high as 90% over the last two years. That adds recruiting, hiring, and training costs, and makes it hard to keep to schedules and load commitments. It’s part of ‘The Great Resignation’, and it hit trucking harder than most other sectors.
Second, one of the choices drivers made was to leave employment at trucking firms, and become owner-operators. The figures Dr Miller shows on this are remarkable.
Many of these new owner-operator firms were local freight rather than long-haul, showing that drivers wanted to be home more often than a long-haul schedule allows. Acting as an owner-operator also allows drivers to choose which loads they will accept; they can reject loads that carry onerous schedules or working conditions or excessive paperwork. As employees they had no say about which job they would take.
We know that trucking as an owner-operator is an easy-entry business. All you need to do is have a tractor and the appropriate filings with the government. Load boards provide a constant source of business you can bid on. And over time you can build a repeat-business clientele of shippers you want to work with.
You can also easily switch markets. Now that West Coast freight rates have shot up, we find that owner-operators have left the East and Midwest and flocked there to feast on the elevated drayage and haulage rates in the West. That creates shortages in other areas.
Miller has some advice for C.H. Robinson clients, which you can read. I wanted to highlight the article for its insightful look at aspects of truck driver supply we don’t often think about.
Trucking never fails to be interesting to examine!
Two less-obvious reasons why trucking capacity has remained so tight | C.H. Robinson blog
It’s about time that Long Beach is able to provide on-dock container rail handling. Drayage trucks have been a massive source of pollution in the area since the 1990s. Even the Clean Trucks initiative, helpful though it was, can’t keep the particulates and other noxious elements of diesel exhaust down. The proper solution is on-dock rail.
Though this won’t touch the total cost of the project, it’s enough to get it going. It can certainly fund studies and preliminary work.
The time frame isn’t till 2025 for the first trains, though.