The Trucker Shortage
As manufacturers ramp-up production to meet the increasing demands of a growing U.S. economy, they are forced to deal with transportation shortages. They are faced with driver and equipment shortages for both long-haul and local deliveries. In addition to these issues, they are also experiencing significant increases in rail delivery lead times. As one of our customers put it, the rail and truck delivery systems are running at maximum capacity. The transportation system is full. Companies across the spectrum including manufacturing, retail, agriculture, and consumer goods must manage increased transportation costs and longer delivery times for both truck and rail shipments.
In October of 2017, the American Trucking Association, ATA, reported a trucker’s shortage of 50,000 drivers, an increase from 36,000 in 2016. This number could triple by 2026 if the issue is not addressed. The trucker shortage causes a domino effect on rail transportation and rail delivery lead times. According to one of our customer's logistics managers, “The trucker shortage has impacted the railways by creating backups for shipments. Truckers are avoiding the long haul runs due to the quality of life issues. Everyone wants to be at home for dinner resulting in a shortage of long-haul trucks and truckers. To combat this issue, companies are shipping their long-haul cargo via railways with local truckers making the short-haul delivery from Railyard to the customer.” This has resulted in an increase delivery lead time from an average of 10 days to 30 days for rail deliveries. Companies have had to contract long-haul trucks at premium rates to make warehouse and customer deliveries to work around the rail backlog. The CEO of Tyson Foods, Tom Hayes, predicts that they will have to pay an additional $250 million in shipping expenses in 2018.
Is There a Solution?
Many states allow 18-year-old commercial drivers to operate all truck types within the state borders. However, to deliver loads across state lines requires a federal CDL (Commercial Driver’s License) and the minimum age for a CDL is 21. Congress has issued a DRIVE-Safe Act that lowers the commercial interstate driving age from 21 to 18. The acronym for this bill stands for Developing Responsible Individuals for a Vibrant Economy. Reducing the minimum age for drivers would increase the pool of potential truck drivers and ease the shortage. Drivers under 21 would have to complete an apprenticeship program. The apprentice program requires 400 hours of on-duty time with 240 hours of those hours under the supervision of an experienced licensed CDL driver. The program has a 65-mph speed limit cap, and the truck would have to have installed video cameras.
Other options are being considered to help with the trucker shortage. The wage increase, bonus pay, and increased benefits are options under serious discussion. Increasing the driver’s take-home pay as well as providing good health benefits and pension plans would attract more drivers to the industry and entice them to make it a long-term career. Walmart is a leader is their drivers wages as they have raised their salaries to almost $85k per year. Increasing the pay and benefits of the drivers will most like result in higher prices to transport goods. There is also a big push to attract more women to consider this career path. Some companies have sourced their drivers through private fleets of vans or have contracted out the work to cover for the shortage. New federal safety regulations have made significant restrictions for the number of hours a driver can spend on the road, causing longer time away from home that leaves many potential truckers uninterested in driving. Customers are also increasingly putting inventory into more offsite warehouses.
Additional Warehouse Inventories
David White, Senior Director of Transportation & Logistics for Domtar stated at a recent RISI conference that Domtar was moving inventory closer to their customers to try and combat the shortage of transportation. He also went on to say that the increased cost of shipping was not what was hurting as much as the monthly variations in shipping costs and spot prices.
Be a Better Shipper
Some other comments related to this made at the RISI North American Conference that were enlightening came from Greg Ritter, Chief Customer Office at XPO Logistics. He said that given the shortage that companies needed to think about being better shippers. Being ready and on-time with the shipments when drivers arrive. He also said that carriers like XPO wanted to get more lane commitments between companies and themselves, to better set rates for longer period of time, so that they had consistency as well.
Another option in the discussion is the use of self-driving trucks. The advent of self-driving vehicles may transform the trucking industry. However, at this time fully autonomous trucks will not be ready to handle all driving tasks and conditions anytime soon. Andrew Lynch, Co-Founder, and President of Zipline Logistics articulates that we are a long way from fully automated driving technology being fully baked. We are not even close to having those trucks on the highway. The current highway system were designed for and is currently clogged by human drivers.
Technology companies have a vision of fully autonomous trucks in the future by limiting the scope of where they can operate, leaving much of the work to human drivers in conventional vehicles. The first step will be to have a system where human drivers and driving automation work hand in hand to transport freight more efficiently. However, the combination of a human driver and an automated truck driving system is still yet to be defined.
One design is the “transfer hub” model. Unmanned long-haul trucks would travel from exit to exit on freeways and swap trailers with trucks operated by local drivers at designated transfer stations. Another design is “teleoperation” of independent trucks with remote backup drivers or piggybacking on truck platooning technology to create mixed convoys of piloted and autonomous vehicles. Autonomous models require transportation department approval, significant investment by the transportation companies, and a significant amount of time to implement.
Being Flexible in a Dynamic Business Environment
The business landscape is dynamic, and the logistics area right now is a system that is overloaded and under-resourced. In this environment, manufacturers and suppliers must be ready and able on a daily basis. This means they need to be proactive and reactive at the same time. One key to navigating the current environment is flexibility. Talking with our customers, some of them are expanding their warehouse space and delivering using rail under longer lead times. Other customers have reduced their warehouse space and have partnered with their customers to better forecast demand and utilize rail service with a longer lead time. Other customers have contracted with short-haul truckers near their customers to deliver from their warehouses. The flexibility of the Elixir® system is to support accurate forecasting, as well as support and track in transit, warehouse, and consignment inventory. This gives our customers the tools they need to manage logistics in the current environment. Elixir's Integrated Transportation Management solution (TMS) provides tools to define carrier business shares, which can define the number of shipments in a given lane within a given time period, along with the agreed upon rates. Then it will assign, track and report on that agreement.
Elixir is more than just software; it is a system that is continuously engineered to provide our customers the tools they need to be both proactive and reactive in today’s dynamic business environment.