I recently attended the Truckload Carriers Association’s annual conference in Las Vegas. The program I found most interesting was a panel composed of executives from some of the largest asset providers in the country. This year’s panel consisted of Derek Leathers (COO of Werner), Max Fuller (CEO and Chairman of U.S. Xpress), and Dan England (Chairman of C.R. England).
What was the underlying message they delivered?
Continued inward pressures will drive rate increases into the future. Arguably, folks can see these types of messages delivered every year as a way to pressure shippers into believing supply and demand is more offset than it is. Are these large carriers trying to create some fear in the shipping community? Possibly, but when you look at the facts, they make sense.
Investments in better tools and talent have helped carriers to measure revenue, utilization, and costs in a much more quantitative way. These measurements point to the need for more sustainable rates so carriers can reinvest in their businesses.
What are the inward pressures that carriers are feeling?
Continued driver shortages are an ongoing theme. Some have estimated that there were 10 to 20 percent fewer applicants for truck driver positions. This shortage of applicants causes wage increases, higher recruiting costs, and turnover as drivers jump jobs. It is no secret that the aging driver issue is continuing to put stress on carriers. Fewer qualified drivers mean fewer trucks on the road. Fewer trucks on the road coupled with mild tonnage increases will tip the supply and demand scales.
Speaking of trucks on the road, equipment costs are way up. One executive said equipment costs are up 40 percent. Considering that equipment and drivers are two of the bigger components in running a trucking company, this places heavy pressure on operating costs.
In addition to increased costs, carriers are feeling tighter regulations from the government. Recent years have brought new technology/standards for measuring carriers and drivers. CSA and the expected Hours of Service changes coming this year are very challenging. Driver job satisfaction and productivity are in question. Many of these inward pressures are compounding for the carrier community.
Where are trucking rates going?
Most people want to cut to the chase and talk about the rate predictions. Predictions at the conference varied a bit. Some claimed that a 4 percent increase was quite possible, while others suggested high single digits. Regardless of the actual number, most need to recognize that pressures drive the market. These are all real pressures that the industry is facing.
The future of the industry will continue to encounter headwinds. It seems easy for people to discount what these carriers say and claim it as a scare tactic. The reality? These costs and regulatory factors can reduce profitability. Less profitability puts carriers in a position where they simply cannot reinvest in their business. If we expect to keep supply chains moving (and improving), we need to invest in the carriers that helped build this industry.