We’ve seen a catastrophic drop in demand for trucking freight. It’s natural given the very high prices for truck hauls recently. Now tender rejection, a measure of how often trucking firms reject contracted loads to go after higher-paying spot market loads, has dropped to around 9% from well over 20%.
Does this mean that the inventory buildup also is about over? We hear conflicting things from the maritime front. There are still ships waiting to unload, even though Shanghai has reduced its shipping considerably. Many firms have gone to private shipping rather than using the liner alliances. But the containers still seem to be coming.
It’s a good question what portion of the trucking drop is to be attributed simply to the high prices, and what part to the actual reduction of demand.
I think it may be the high prices. They may be inducing shippers and buyers to hold off to keep logistics costs down. Buying larger orders less often is a good way to reduce total inventory cost, even if you leave out quantity discounting. So firms can plan to buy later. It may pay off with reduced trucking need and lower truck haul prices.
So is there a driver shortage? We may be training a bunch of new drivers just as the demand for them is cratering. How is that good for those people?
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.
Source: CH Robinson Blog
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
Heavy-duty truck parking is a big issue everywhere. I’m originally from Philly, and can appreciate both sides of this story.
Truckers need places to park their rigs when they are at home– places that are safe to leave a truck worth upwards of a half-million, and near enough to home that they can get to it easily. Neighborhoods in old cities don’t lend themselves to big rigs parking and maneuvering there. Many Philly neighborhoods have narrow streets, and plenty of overhead wires and other hazards easily hit by a big rig. And residents could well complain about parking space taken up by a heavy-duty truck and trailer.
The problem is not easy to solve. A blueprint for action exists, courtesy of the Federal Highway Administration and Cambridge Systematics, but money for truck parking was left out of the infrastructure bill recently passed by Congress. It probably would not have been used for this kind of parking anyway– more likely for truckstop and major interstate parking, or parking near ports and warehouse clusters.
City governments are not well prepared to deal with this kind of problem, and results will vary across the country.
For years many truckers have lived in small rural communities with lots of space, either on their own place or at a commercial spot. That makes truck parking easier. But truckers should be able to live in a big city and find somewhere to park, though like many big-city residents they may have to pay for it.
John Gallagher, Washington Correspondent Follow on TwitterThursday, December 16, 2021
Supply Chain and Logistics 