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          How the US trucking shortage has affected ocean freight logistics

          How the US trucking shortage has affected ocean freight logistics

          The US truck driver shortage problem has been a long-standing one for decades. This scarcity was, however, further aggravated when a mandate that obliged the electronic logging of truckers’ activities went into effect in December 2017 — lowering trucking productivity and effectively draining already-scarce resources.

          Prior to implementation, the Electronic Logging Device (ELD) mandate was not met with no resistance. Proponents said such a measure would improve road safety, whereas opponents argued whether the pros would outweigh the cons.

          One major concern then, among others, was the impact it would have on transportation and logistics. More specifically, it was a question of how badly and not whether these sectors would be affected.

          As foreseen by many, the US trucking industry went on to face a severe capacity crunch in the early months of 2018 as a result. This was to the extent that some trucking companies reportedly had to turn down orders.

          It’s now been 16 months since the mandate came into effect and just over a year since its hard enforcement.

          How has the industry coped?

          Truck driver shortage impact on the logistics industry as a whole

          The immediate aftermath of the ELD mandate saw trucking capacity tank in early 2018. And by the middle of the year, rates had skyrocketed to record highs as the industry experienced a period of turbulent prices, delays, and disruptions.

          But even as industry players began to accustom and adjust themselves to the workings of electronic logging for truckers, supply chains remained tight. It seemed that one clear consequence was the vulnerability to disruptions and the inability to recover from them.

          “We have diminished ability to recover from hiccups, such as delays from previous stops. Those hiccups can include congestion, especially on the East Coast, where we’re seeing a lot of that, and mechanical breakdowns.”

          Jeffrey L. Meyer, Nestle Purina Petcare group manager of transportation

          The situation may have improved somewhat since then, but it is still nowhere near where the industry would like it to be. Congestion, delays and increased overall transportation costs continue to cause problems.

          The biggest challenge has been with getting coverage for last-minute shipments or shipments where last minute changes often happen.

          With most truckers booked up for days in advance, unanticipated changes usually mean cargo delays or having to accruing additional costs because shipments end up going into storage or demurrage or simply because a higher rate is needed to secure a trucker who can handle the move.

          “Double check rates and transit time before committing to a shipment. Add extra days to your transit and plan accordingly. Do not send in paperwork on the same day or the day before your cut off. Allow for extra time to make sure there’s equipment available.”

          — Jose de la Roche, Sales Director, GLT Logistics

          Turning to rail for comfort

          Amid this shortage, some companies have reportedly considered turning to rail as an alternative in an attempt to push down costs. But there is a question of how feasible this will be as a solution.

          Already, rail rates have risen in response. Just recently, leading rail transportation company Union Pacific announced changes to its storage free time and charges as a result of the trucking shortage and higher dwell times at terminals. These changes, which came into effect on April 1, 2019, now include Sundays as a billable day.

          Rail costs may still be lower at the moment, but there’s no telling for how long it will stay this way. Plus, there lacks the flexibility of having a truck handle point-to-point delivery.

          “Rail is not a solution for anybody but the largest shippers. The scale that the rail companies work on means that it is not feasible to entertain unless you have some serious volume to move with the rails. Your cargo should preferably also move in the same lanes so that you can standardize your set up.”

          — Klaus Lysdal, VP of Operations, iContainers

          End consumers to partake in the financial burden

          With the trucking industry responsible for 70% of freight, the shortage is bound to set off a chain reaction across the logistics and ocean freight industries as repercussions eventually trickle down to the end consumer.

          The lack of drivers means less cargo is being transported at any given time, holding up orders and causing a backlog that prevents vendors and suppliers from selling more.

          Cost per mile Business Insider

          As it stands, transportation rates have already soared as a result. From Amazon and Coca-Cola to Nestlé, an entire slew of companies in the US have reported facing logistics bottlenecks with trucking and increases in freight costs.

          And as a consequence, manufacturers including General Mills, Tyson Foods, and Procter & Gamble have indicated that they will be passing down this cost increase to consumers by raising product prices.

          “Product prices must reflect the true cost because we cannot subsidize the increased freight.”

          — Tom Hayes, Chief Executive, Tyson Foods

          Incentives not baiting enough

          2018 saw a year of growth in average truckers’ wages as shortage hit a critical low. According to the National Transportation Institute, truck drivers’ pay increased around 10% across the board.

          Trucking companies have also begun to offer more attractive sign-on packages.

          But such measures are not the only incentives the trucking industry has rolled out in a desperate attempt to entice and lure new drivers.

          At one point, there were suggestions to lower the age limit for driving commercial vehicles across state lines from 21 to 18.

          “It is a very difficult time for trucking companies. They are finding it very hard to hire new drivers because of the conditions. Long-haul drivers are away from home for two to three weeks at one go. Regulations are also making it hard. Companies cannot simply put a driver on the road immediately as they need to have experience before insurance companies approve them.”

          — Jose de la Roche, Sales Director, GLT Logistics

          Despite these efforts, it does not appear that many are baiting. And this is certainly a cause for worry.

          Recent figures by the American Trucking Associations put the current shortage at more than 50,000. This is expected to double to over 100,000 in three years and hit 175,000 by 2026.

          Taking into account older drivers’ retirements and others leaving the sector, the ATA says as many as 900,000 drivers will need to be hired over the next decade to sufficiently offset the drain.

          Shippers adapting faster than solution being found

          With no clear solution on the horizon, both trucking companies and shippers have had to adjust and make the most of these limitations. And so far, it seems their pace of acclimatization to the new challenges has been much quicker than the speed at which the problem is being resolved.

          “Truckers have gotten better at managing and working within the new regulations. Shippers have also realized that more planning is required in advance to make sure things run smoothly. There is now very little room for last-minute solutions.“

          — Klaus Lysdal

          The situation is certainly jeopardizing planning and causing severe headaches for US exporters. Carriers, rail yards, and terminals have not changed the way they work to handle the shortage.

          As such, there is now a more urgent need for them to better understand the time window they have to work with and to plan and adapt as needed. Otherwise, these added hurdles to their supply chains could affect their competitivity in international markets.

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