Top trucking executives forecast continued tough conditions for shippers
It’s been a rocky last six months for U.S. motor freight
shippers, and if forecasts from three top trucking executives at this spring’s NASSTRAC Shippers Conference &
Transportation Expo are any indication, it’s likely to get
rockier.
None of the three sugarcoated the conditions ahead.
None seemed optimistic the environment of tight capacity
and higher costs being felt almost across the board would
abate when the yearly calendar turns. In fact, even if the
economy slides in 2019 and freight demand goes with it—a
scenario none of the panelists would predict—carriers will
still be grappling with the secular challenge of recruiting and retaining qualified drivers, according to Thomas
Connery, president of New England Motor Freight Inc.
(NEMF), an Elizabeth, N.J.-based carrier and logistics service
provider whose core business is in
less-than-truckload (LTL) shipments.
“We are not going to stop recruiting and hiring, and wages will continue to rise unless something transformative happens,” Connery said at
the event in Orlando, Fla. He was at a
loss to state what that bolt-from-the-blue event could be.
Connery added that price pressures
are coming from unconventional sources. For example,
Chicago-based trailer manufacturer Great Dane has applied
a 5-percent increase on NEMF’s trailer purchases to offset
higher raw-materials costs, Connery said. This will raise the
carrier’s per-trailer costs by about $1,600, he added.
Being in a business of derived demand, truckers are
inherently reactive to slowing economic conditions rather
than being ahead of the curve. “We’re not doing much to
prepare for a slowdown,” said Greg G. Gantt, president
and CEO of LTL carrier Old Dominion Freight Line Inc.
Thomasville, N.C.-based Old Dominion will re-evaluate its
cost structure to keep it in line with any falloff in demand,
Gantt said. But cutting freight rates to keep or gain market share—which Old Dominion refused to do during the
2007–09 downturn—is not in the game plan this time
either, Gantt said. “You can’t go against your pricing principles,” he said.
DRIVER WOES PERSIST
In the meantime, carriers continue to struggle with a host
of driver-related issues, including rising pressure on wages.
Within a year after being hired, a truckload driver can expect
a $10,000 bump in pay to at least $60,000 a year, according
to Craig Callahan, executive vice president and chief com-
mercial officer of Werner Enterprises Inc., an Omaha, Neb.-
based truckload and logistics service provider. Those pay
rates are just the price of admission, Callahan said. Driver
pay is likely to escalate in the months and years ahead, with
experienced drivers pulling down $80,000 a year or more,
and salaries for qualified team drivers, who are in very short
supply, topping $100,000 a year, Callahan said.
Werner is hiring about 10,000 drivers a year just to keep
pace with annual turnover and shipper demand, Callahan
added. However, he warned that even that pace of hiring
would not, in and of itself, remedy all of the carrier’s service
challenges.
The biggest pain points for driver recruitment have been
along the East and West coasts. In the East, the problem
is compounded by inclement winter weather for three to
four months, which makes it difficult to recruit drivers to
run over terrible conditions in the middle of the night.
Connery said NEMF bids out work in the region to local
pickup and delivery drivers to meet
customer commitments while freeing up other drivers for longer-haul
routes.
The federal government’s mandate that virtually all trucks built
after the year 2000 be equipped
with electronic logging devices
(ELDs) has cut fleet productivity
by between 3 and 10 percent since
the mandate took effect Dec. 18, according to unscientific
estimates being bandied about at the conference. As of
the end of April, between 4 and 7 percent of capacity is
still not ELD-compliant, even though enforcement of the
mandate—and the out-of-service orders that accompany
it—kicked in on April 1.
As expected, the biggest problem has been in 650- to
700-mile hauls, which are difficult for drivers to complete in
one driving day, especially if they need to return to a home
base after delivering their shipment. With driver reluctance
to haul those loads keeping supply tight, that segment is
seeing a “significant amount of price inflation,” according
to Gantt. Overall, Old Dominion has experienced minimal
impact from broad ELD implementation other than a slight
increase in average shipment weight and shorter haul
lengths, he added.
LTL carriers are not as exposed to the ELD fallout as their
truckload brethren because LTL drivers run comparatively
shorter distances. Because of that, carriers like NEMF are
receiving overload freight that, in a normal environment,
would move via truckload. Due to the diversions, Connery
said, the carrier’s average weight per shipment is up 7
percent from this time a year ago. This is an unsustainable
situation because NEMF’s LTL network is not structured to
efficiently handle large quantities of truckload-type shipments over and over again, he said.
—M.S.
