Kuebix - Driver Shortage Study

New Study Questions Validity of the Truck Driver Shortage

It’s been taken as fact for many years that there is a shortage of truck drivers in the United States. Companies report problems covering their loads and even the American Trucking Associations announced that there will be a shortage of 174,000 drivers by 2026 if the current climate continues. Here are just a few of the logical reasons many believe there is a driver shortage.

For instance, the growth in popularity of e-commerce ordering has increased the frequency of shipments, especially for the final mile. Trends like “the Amazon Effect” have warped customer expectations to the point that most people expect their orders in just a few days, meaning shippers need to work hard to position orders to arrive in time. It’s also understood that Millennials aren’t replacing Baby Boomer truckers at a swift enough rate as the older generation enters retiring age. All of these reasons couple together to paint a picture of a truck driver shortage.

A recent study by the U.S. Bureau of Labor Statistics is questioning this assumption. The study released in March 2019 questions whether the U.S. labor market for truck drivers is really broken. According to the study, discussion of a supposed driver shortage has been happening in the industry on and off since the late 1980s. They posit that real disequilibrium in a specific job market can only be sustained long-term if there is a systemic issue.

“This disequilibrium suggests either some unusual and persistent causal factor at work, such as a skills mismatch or a regulatory constraint preventing workers from entering employment or changing occupations, or a misapplication of economic terminology in describing the business situation.”

In layman’s terms, there needs to be some external factor making it impossible for enough drivers to be hired. Otherwise, as the study suggests, the market would naturally correct itself with rising wages and benefits. They suggest that since there are no causal factors preventing entry into the truck driving job market, there cannot be a driver shortage.

If you’ve ever taken an Economics course, you’ve probably come across the Law of Supply and Demand. This theory is generally used when discussing markets for purchased goods but is also relevant when discussing jobs. “The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship. Price, therefore, is a reflection of supply and demand.” In this case, price = drivers’ salaries.

According to the study, if there is a real need for a service, prices will rise to bring the market back to equilibrium. There were, however, “indicators suggesting that the market for truck drivers has been tight over the period from 2003 through 2017: wages in the occupation have been strong relative to those in similar occupations…” To put it simply, there has been a shortage of drivers, but the market rebalances itself with adjusted wages to entice new talent to the industry.

Even though it may be difficult for companies who need to ship product to find drivers, in the end, they are finding enough. Somehow products are being delivered and sellers in every industry continue to be able to do business. If this is all true, the argument could be made that the availability of drivers is tight and getting tighter, but not at the point yet where vast changes in salaries take effect to bring the industry back to equilibrium.

Final Mile Kuebix

The High Costs of Final-Mile Delivery

The final mile of delivery is said to be the most expensive portion of the equation. BI Intelligence equates the share of the total cost of shipping for the last mile at 53 percent of delivery costs overall.

It is costly because it has a larger human element than the other segments of transportation with drivers going door-to-door to drop off packages. In an urban environment, the distance between deliveries can be a couple of flights of stairs, but in a rural scenario, drivers may have to drive miles and miles before they get to their next drop-off point.

If the last-mile delivery experience is poor, such as a package arrives damaged or is left out in the rain, then this can have a negative impact on a company’s brand. Sometimes deliveries have to be made several times because the recipient was not at home and the delivery requires a signature; this hikes up the delivery costs even more.

In some instances, the final mile delivery is the first personal contact between the consumer and the product. If the delivery is poor, then the brand is affected. Was the driver late? Is the packaging damaged? Was the delivery person rude? With customer expectations so high, a lot is at stake if a delivery goes awry.

The last-mile is expensive, inefficient and risky (for a firm’s reputation) – yet people want that “Amazon Experience” where they can track their package via a mobile phone app, with alerts if the package will be delayed and notices when a package has arrived. This type of transparency requires visibility and real-time tracking of orders.

Says Business Insider, “The costs and inefficiencies of the last mile problem have only been further compounded by the continuous rise of e-commerce in US retail sales, which has dramatically increased the number of parcels delivered each day, as well as raised customer expectations to include not just fast, but also free, delivery.” In other words, the issues surrounding the last mile are not going away.

So, what can you do?

Companies can ensure that their organization has complete visibility to any delivery delays, exceptions or missed appointments with the use of technology. Whether a company is delivering to a residence or business; utilizing owner operators or asset-based fleets; or is delivering a unique one-time shipment with a rate from the spot market, a transportation management system can help.

Trucking in America *Infographic*

The job of a truck driver in America is crucial. Trucking is the backbone of our economy and just about every industry would collapse without it. In fact, 71% of all freight tonnage moves on trucks in the USA. That means everything from food to medicine to building materials at one point probably rode on a truck.

There are 3.5 million professional truck drivers in the US right now and there are another 5.2 million people who hold positions in the industry that support drivers. These positions include logistics managers, routers, schedulers and various other office or warehouse positions. Together, all of these people work to get products onto trucks and delivered to the end customer.

There’s a major problem, however. There aren’t enough truck drivers and this driver shortage is only expected to worsen. The average age of a truck driver in the states is 55 years old. That means there are many who are swiftly approaching retirement age and leaving the workforce. This wouldn’t be a problem if younger generations were taking up the mantle and backfilling vacant positions left by Baby Boomers as they retire. Millennials and Gen Xers aren’t filling these newly vacant positions, however.

In just 7 short years, the American Trucking Associations estimates that we will be short more than 175,000 drivers. This will put renewed pressure on an industry that is already strapped for drivers. It will be up to carriers to entice new labor out of the workforce by offering training programs and opportunities for advancement. Other technological advancements like truck platooning and autonomous vehicles could help to alleviate some of the pressure.

The trucking industry faces many challenges over the next decade. Without enough trucks to deliver all the goods produced in our economy, other industries would stagnate and everyday life would come to a halt. That makes it almost a certainty that the industry will rise to the challenge of the driver shortage and find new and inventive ways to mitigate the negative impacts. It will be interesting to see how the driver shortage progresses!

Trucker Infographic Kuebix

The State of the Supply Chain Industry: Mid-Year Predictions

It’s June and the half-way point of the year. Kuebix made predictions about the industry at the first of the year. We still believe that this year will be an enormous change in the supply chain industry due to the issues around the ELD mandate, rising diesel prices, the capacity crunch, increased customer expectations, tariffs and more.

To meet these challenges, businesses are using technology to transform their logistics operations, leading to improved customer service, sustained profits and greater efficiencies. Utilization of transportation management systems is at an all-time high, proven by Kuebix with the adoption of our technology by over 11,000 companies.

For the remainder of the year, this is what Kuebix believes will happen in our industry:

  • •     The ELD Mandate is here to stay and shippers need to embrace the rules while turning the constraint into an opportunity to leverage technology to track their delays and put fixes in place to combat them. TMS can also reduce the number of trucks on the road and improve unloading and loading times by consolidating and optimizing loads.
  • •     Tariffs – The 25 percent tariff imposed on imported steel from the EU, Mexico and Canada, and the 10 percent tariff on aluminum continue to be a trend. Many are predicting that the import duties will drive product prices up for the consumer. The day before the tariffs kicked-in, the stock market fell 250 points as people questioned the stability of the economy, foreseeing retaliation from countries affected by the tariffs.
  • •     Diesel prices – Diesel prices have already jumped 7 cents in the most recent weeks. To keep costs contained, businesses need to reduce mileage to help lower fuel usage.
  • •     Cloudbased TMSs continue to grow in popularity as they can be up and running in a manner of minutes or days, depending on the complexity of your supply chain. They are also easier to maintain and have a lower cost of ownership.
  • •     Higher rates – Shippers are concerned with increasing transport rates from carriers. One method to keep rates level is to help make carriers more efficient with technology for shipment consolidation and yard management that maximizes carrier capacity and minimizes time wasted in the yard.
  • •     Capacity Crunch – The continuing capacity crunch is getting worse, with some carriers saying they have 20+ loads to move per truck. By using a collaborative network of carriers, suppliers and fleet owners, shippers can have visibility to the best truck to move their product from original to destination.
  • •     Customer Experience – E-commerce now makes up a total of 17% of all retail sales in the US. Those consumers are demanding customer experiences to rival that of brick-and-mortar stores. To keep customers from purchasing from the competition, shippers must provide tracking statuses, shipping flexibility and improved delivery speed. Emphasis on the final mile is increasingly important for customer retention.
  • •     Next-generation technologies like Machine Learning (ML) and Artificial Intelligence (AI) are growing in popularity within the industry by integrating with predictive analytics to fuel better decision making.
  • •     As the driver shortage worsens as more truckers retire and leave the industry, carriers need to take more aggressive actions to recruit new drivers while retaining existing drivers. These actions can include pay increases, using technology to let carriers schedule their own activities, and improving turnaround times for loading/unloading so that truckers can keep their wheels moving as soon as possible.

Supply chains will only become smarter and more valuable as shippers adopt new technologies that help them better compete within our digital supply chain ecosystem. Kuebix TMS enables companies to capitalize on supply chain opportunities through visibility, control and the use of predictive analytics.