As you may have noticed, I have taken a 6-week summer vacation from my editorials. Not really a summer vacation, but rather, my June and July client and TCA meeting schedule took over. While a little grueling under these new travel challenges with less routes, higher ticket and room prices, and no customer service whatsoever, it was great to get where I wanted to be — seeing my friends and clients in person. Many of these sessions were spent interacting with our driver population, which I always find very enlightening. So, here are some of my takeaways on the current state of trucking from my summer vacation:
- Drivers are getting paid more money, spending more time at home, and achieving more balance in their work-life ratio. I believe this is a great thing for our professional Commercial Vehicle Operators (CVO). However, it does change the dynamics of trucking capacity. With more money and less availability to drive, the amount of Freight Hauling Capacity (FHC) has shrunk, even though the number of trucks has not;
- Speaking of trucks and all that equipment…the words scarcity and higher prices. Tractors have taken on a whole new life of their own. While many fleets are having a tough time recruiting and retaining drivers, any empty trucks are being sold into a used truck market that is very hot. This phenomenon is adding to the reduced amount of Freight Hauling Capacity (FHC). However, it seems that some of these used trucks and trailers are finding their way into the spot market;
- The spot market has obviously seen some added inventory into the supply side through these purchases, however, these smaller carriers have got a better cost recapture pricing strategy than the larger folks due to the maintained higher spot rates than contract rates for over a year now. With the increase in rates, many of these smaller carriers can work 20-25% less and still meet their revenue goals; and
- The biggest takeaway — the workforce challenges. We need people at all levels of the food chain. Labor shortages are increasing wage and acquisition costs. The shortage is killing the supply chain at all levels. Thus, adding to the start of a new inflation cycle.
I lived during the early 80’s when inflation was running rampant, and interest rates were bouncing off 18-20%. Equipment was taking quarterly surcharge increases. Labor was limited and prices were higher. And the deregulation disrupted the whole trucking industry. Interesting?
What did I find out on my summer vacation? The industry is completely oversold and will remain that way for a long time. The drivers are earning more money and working less, that is good for them. The first signs of inflation are upon us. The industry needs higher rates to cover higher costs, already discovered in the spot market. Remember, trucking is always the lead industry for the rest of the economy.