Uncertainty. Chaos. Confusion. That’s how you might characterize the trucking industry today.
Coming out of the pandemic, the trucking industry struggled with contactless operations. The need for heightened attention to health and safety, adverse weather conditions, and increased unpredictable events have further challenged ground transport.
Add to that unmatched demands of e-Commerce, pent-up consumer demand, and supply chain disruption. In response, the trucking industry is transforming and now finds itself in transition.
The industry is transitioning from pre- to post-pandemic operating environment and conditions.
One long-standing, persistent issue impacting the industry has been the driver shortage. This blog post will do a deep dive unpacking how the driver shortage impacts your business.
Its main focus is on helping you secure access to capacity at favorable rates.
We’ll probe three questions that are central to finding relief from the driver shortage.
The Covid-effect: When Will Drivers Return to Work?
One unknown today is when drivers will return to their cabs. Since Covid-19, the truck driver population has declined. Some became ill with Covid-19. Others found themselves out-of-work due to factory shutdowns. And many found the pandemic as a convenient time to retire.
Then the government began issuing stimulus checks to help workers survive pandemic-induced unemployment. In fact, the federal government issued three rounds of stimulus checks. And now Congress is discussing a fourth round.
On top of that some states are offering their own stimulus checks or tax rebates. They include California, Florida, Maryland, and New Mexico. Other states may soon follow suit.
Florida’s plan, for example, limits recipients to first responders. But California and Maryland are offering benefits to all workers. New Mexico, meanwhile, is offering tax rebates to workers who are not dependents.
Then workers also receive additional benefits under the Pandemic Unemployment Act (PUA). This Act provides an extra $300 per week to unemployed workers. That’s over and above state unemployment benefits. These benefits will run through September 6, 2021.
Another program applies to workers not eligible for regular unemployment benefits. They include gig workers, independent contractors, and self-employed works. Recently, the government extended benefits for this group from 50 weeks to 79 weeks.
These unemployment benefits programs have helped workers during the toughest times. But now they’re acting as a disincentive for workers to return to their jobs.
So, uncertainty about when drivers will return to their jobs lingers.
The Role and Effect of Compensation: Is the Incentive of Increased Pay Enough?
Compensation seems to be the obvious “Go-to” solution for attracting labor. And that’s no different for attracting truck drivers. But a shortage of drivers still persists.
Maybe salaries aren’t high enough?
Well, that may be true, but in the current environment, that’s changing. Trucking companies are beginning to increase salaries. They’re becoming more competitive, yet the shortfall persists.
This suggests, perhaps, pay might not be the only issue. For example, pay rates have increased since 1990. Now – 22 years later – the driver shortage still persists. Even though pay has increased the shortage relentlessly continues.
Year-over-year data for October 2019 to October 2020 show truck driver jobs are down by 65,700 jobs. That’s stunning given that 63,500 jobs were added since April 2020.
In digging deeper, you’ll find drivers are looking for more. They’re looking for favorable working conditions. Today, drivers spend more time on the road than ever. That means they’re away from their families for extended periods of time. And drivers waste much of that time waiting – more on that below.
The answer in attracting drivers may lie in approaching this issue holistically. And in doing so, trucking companies need to consider how to complement compensation.
Drivers are looking for long-term careers with a company – not merely a job. Therefore, companies need to look at the entire package. Besides attractive perks, trucking companies should also think about working conditions in recruiting drivers.
Recruitment must change to attract drivers to help end the unyielding shortage.
Worsening Working Conditions: Why are Working Conditions Declining?
We just said companies need to address working conditions. Easier said than done.
Trends show working conditions are worsening, not improving. As already mentioned drivers are on the road longer than ever. They spend an inordinate amount of time waiting to load and unload. Dwell time is too high.
On average, truckers drive about 7 hours out of the 11 they’re allowed to drive. That means drivers spend 4 hours per day or 36% on dwell time. You can see there’s plenty of room for improvement here. An MIT study reveals that if each driver drove just 12 more minutes per day that would end the driver shortage.
Also, truckers fight daily traffic. So, road accidents remain a significant problem with most accidents caused by cars. And more health and safety issues have arisen due to Covid-19.
Now, the Teamsters want to reverse the latest Hours of Service (HOS) regulation. Doing so, some argue, will only make matters worse for truckers. Rather than improving conditions, a reversal might only further diminish working conditions.
With an expected strong economic recovery, this trend shows no signs of easing. The increasing pace of work will likely continue to put pressure on the trucking industry.
The data show increased imports from the Far East. Looking at trade volumes from the Far East to North America we see rising volumes.
In January, imports increased 20.0 %. In February, imports increased 103.8%, and in March, imports increased 70.4%. In April imports increased 43.8%. (2021data provided by Container Trades Statistics Ltd.)
Peak season isn’t here yet, but it’s just around the corner. Against this backdrop, you can expect disruption and congestion to continue. That will only contribute to worsening conditions.
What You Can Expect
It seems the pandemic has uprooted supply chains from their foundations. At least that’s how you likely see things in this post-pandemic world.
Moreover, trucking’s operating environment will likely remain challenging in the foreseeable future. That’s especially true for the nagging driver shortage. It defies a quick solution, so you likely won’t see a solution in the near- to medium-term.
Capacity, meanwhile, will remain constrained. That means competition for scarce space will create friction in the near- to medium-term as well. And that translates into upward pricing pressure.
None of this makes your job any easier. Instead it puts more pressure on your business. Today’s market is undergoing rapid and rampant change. And it is being dogged the persistent driver shortage. That only leads to and fosters uncertainty, chaos, and confusion.
That’s where American Global Logistics come in.
We’re a proactive and responsive 3PLwith an extensive network of logistics stakeholders. We can help you get the capacity you need… when you need it… at a fair market price.
Contact American Global Logistics to find out how we can help you not just survive but thrive and profit.