The past few weeks I have had the chance to catch up with my friends and clients inside the TCA Best Practice Groups. While everyone is struggling with the high demand they are receiving from their shippers, they are managing their contracted loads according to the network commitments from each shipper. There are some continuing challenges inside the trucking industry that are, and will continue to compound truck availability, especially during economic swings like the one we find ourselves in today.
The driver is number one. We count trucks and truck availability, but that metric clouds the real availability – the number of drivers we must have to use that truck as a tool to fulfill the service they are contracted to do. We have some systemic challenges when it comes to driver availability. That availability is already being impacted and showing some trends across all carriers. Recruiting drivers is becoming tougher and the number of “unseated trucks” is rising. Those trends reduce the supply of trucking hours on the road. The amount of driving hours will be further reduced due to winter driving, more traffic on the road, and drivers wanting to spend more time at home! All those indicators seem normal for drivers in the current market and the historic trucking expectation of a driver to run two weeks and home for three days may be further challenged? Does pay by the mile constrain the driver market? Does a revenue share compensation plan, as employed by some independent contractors, set a roadmap for the future?
So, the carriers are challenged with adding driver capacity. That will require taking on many different strategies; 1) increasing advertising for driver recruitment, 2) increasing costs of building or expending a student driver training program, 3) and increasing driver pay. All these strategies will end up with higher variable driver costs for the industry, and currently by my math, will exceed the targeted rate increases in the current market. These recruiting costs are immediate and needed, however, the rate modifier in the market is much less consistent and many times delayed.
As reported in CCJ this week “…contract rates have risen on average 18 cents a mile since May, said Croke, compared to an average of 93 cents a mile for spot rates.” I would suggest that the Spot Capacity is the winner in this current environment – for spot carriers! Their ability to buy some used trucks and add some capacity is paying off brilliantly. Their ability to recruit drivers on a possible revenue share is a win for the carrier owner and that driver! The carrier owner probably stays below the radar on the National Driver Clearinghouse. Their rate structure is higher than the contract rate (according to DAT) and that true market indicator will continue to rise. Why don’t these bigger carriers just move their capacity to the spot market
When I ask that question, it gets down to long term relationships, year-round volume capacity and a contractual; terms that are beneficial to both parties in increasing the driver productivity. To manage this new dynamic market, carriers and shippers need to be transparent and understand carriers are supplying driver capacity to the market, not trucks. That challenge is getting expensive for larger carriers to fulfill, while some shippers are sending loads to the spot market versus transparently negotiating with the current carrier base that may also have a brokerage arm. This supply Tsunami is just starting, the 4th quarter will be hectic, and 2021 will continue to be challenging.