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The Top 3 Things to be Aware of in 2015

Wednesday, January 21, 2015

With shifts in technology, demographics and market demand, 2015 is shaping up to be an interesting but challenging year. The North American economy is gradually picking up speed after a few challenging years and is expected to have a 3.4% expansion in 2015.

But what does this mean for the trucking industry, and how will companies deal with the expected growth? The following trends are on the rise and may have a significant impact on your business in the upcoming year.

A Worsening Driver Shortage

The dwindling driver conundrum is nothing new to the trucking industry, but it’s a problem with no resolution in sight.Driver turnover reached 103% in late 2014 according to the American Trucking Association, and their Chief Economist Bob Costello reported that roughly 30,000-35,000 trucker jobs were left unfilled. That number is likely on the rise for 2015. He states, “As the industry starts to haul more because demand goes up, we’ll need to add more drivers, nearly 100,000 annually over the next decade, in order to keep pace. [1]”

An economic boom has many benefits, including higher transportation and logistics demand, but without qualified drivers behind the wheel, the trucking industry is facing limits to its growth potential.Rosland Wilson, senior business analyst at Delcan Corp, suggests that the shortage in truck drivers will be the leading problem for not just trucking industries, but the entire economy [2].

There are driving jobs to fill, but too few interested parties. The current driving pool is aging, and with few millennials willing to dive into the trucking industry, the problem seems to be worsening with each year. Factors like tougher drug and alcohol screening, low wages, the personal strains of the job, and the federal Comprehensive Safety Analysis (CSA) regulations have collectively siphoned off a large number of potential drivers, making the few who are available more expensive and harder to retain.

A hefty shortage of drivers, especially in the drayage market, translates into capacity shortages and rate increases that are steeper than those seen in the previous few years. However Jeff Tucker, president of Tucker Worldwide suggests that there are actually drivers available, but carriers simply are not looking in the right places. Referencing government data, Tucker explains that over the last 30 months, the total number of active for-hire carriers has gone up 20 percent from 155,000 carriers at the end of 2012 to 186,000 in late 2014, and that those carriers can be hired by any shipper, carrier, or broker. “The fact is the economy is picking up, and people are willing to drive trucks” Tucker says. The key may just be looking in the right places.

Companies will likely ramp up their recruiting process, possibly offering special promotions, higher pay or driving school tuition discounts to remain viable in a highly competitive field. How to attract a younger, but talented, workforce remains a formidable challenge, which is driving many carriers to consider more innovative strategies to attract new talent. For example, some carriers are promoting shorter routes to allow drivers to have more time at home, making the trucking life more appealing. Providing high-tech vehicles and improved truck stops may also help seal the deal with new recruits.

Tightening Capacity

Freight growth is expected to go hand in hand with the steady economic improvements expected in 2015.Noel Perry, transportation economist and analyst for FTR, suggests that capacity utilization may soar above 100% for six to nine months. While economic growth is good and confidence high, capacity expansion is being stifled by the lack of drivers and other associated costs. U.S. shippers can expect higher transportation costs in relation to the improving economy. Justin Long, a transportation analyst at Stephens investment bank, warns shippers and truckers in 2015 to be prepared for significant rate increases across all modes [3].

As capacity tightens with few drivers on hand, shippers will be engaging third-party logistics providers (3PLs) more frequently as a way to ensure capacity and handle complex strategies. With capacity tight, companies want to be sure that drivers will be sourced when needed. However balancing capacity with uneven surges in demand can be straining on logistics managers and transportation providers alike.

It is possible that capacity is not as tight as it seems as large shippers are over utilizing the same standard carriers, rather than exploiting the potential to be found in new or smaller fleets. 2015 may actually see a rise in the number of private fleets, which often offer a more appealing work environment for drivers. Although solutions to tightening capacity may be found in numerous places, industries are going to become more creative and tech savvy when addressing capacity restraints.

Improving Productivity

It’s no surprise that with a shortage of drivers and restricting new regulations, industries are struggling to boost productivity. When Hours of Service (HOS) increased regulation by the Federal Motor Carrier Safety Administration in July 2013, productivity was estimated to drop by three to five percent. However, in December 2014, a $1 trillion spending bill was approved by Congress, suspending some of the most controversial HOS restrictions until September 2015, the end of the fiscal year.

Drivers no longer have to be off duty from 1 am to 5 am for two consecutive nights before restarting their work clock. The regulation that seven week days must pass before a driver uses the 34-hour restart is also suspended for further analysis. To what extent these regulatory reliefs will amplify productivity remains a point of interest.

In response to fluctuating regulations and demands but with few available drivers, fleets are searching for new ways to improve their productivity, including new technology, longer combinations and heavier trucks. However, increasing load capacity with heavier trucks poses numerous safety risks, and industries continue to look to other solutions. Fleets are also turning to better routing software and logistics managers to save time and money where it counts. Shippers want to streamline their supply chains while keeping service levels on par with current standards, creating a greater demand for nimble logistics managers to successfully navigate the variety of challenges ahead in 2015.

All in all, 2015 is promising great potential for growth, but the question remains: Will trucking and shipping industries be able to keep up with demand?

[1] Berman, Jeff. More than meets the eye when it comes to the truck driver shortage. Logistics Management.http://www.logisticsmgmt.com/article/more_than_meets_the_eye_when_it_comes_to_the_truck_driver_shortage
[2]Wiegand, John. Trucking industry capacity constraints raise concern over driver shortage. MiBiz. October 2014.
Cassidy,William B.Trucking Operators Biggest Worry 2015: Keeping Up with Demand. Trucking Logistics News Joc.

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