Five Important Issues Facing the Trucking Industry

Driver Shortage– There is an ongoing driver shortage in the trucking industry. One of the reasons for the driver shortage is a lack of job security. The average truck driver changes jobs about eight times during a typical 30-year career. On average, a truck driver is unemployed for about four months after a layoff. In addition, trucking is difficult. Many drivers do not realize this until they complete training and begin driving. Once they realize the level of difficulty, they sometimes get out of the industry. Also, the industry loses drivers who decide to find jobs closer to home. Since we are now entering a period of increased economic growth, we may once again experience wage inflation. If so, trucking labor costs will become even more of a problem than they are today. Labor is the largest single cost for trucking companies.

Fuel Cost Increases– I realize that at the moment fuel cost is not a major concern. Fuel prices are going down right now, but the equipment trucking companies now have to use for compliance and safety are much more expensive than they used to be. Labor cost is going up as well, so the lower fuel prices basically are balancing things out. Eventually, diesel fuel cost increases will once again affect the entire economy. These cost increases have already been addressed by freight carriers through the addition of fuel surcharges. From a macro-economic point of view, passing along the increase in diesel fuel costs through fuel surcharges might actually do the U.S. economy some good. Passing price increases quickly down the economic chain causes the adjustment mechanism of decreased demand for oil to occur more quickly. Because most of all freight moved in the nation is moved by truck (approximately 75%), when fuel prices spike, the nation’s suppliers will experience inflationary pressure, due to the rapidly increasing fuel costs.  However, some people believe that the diminishing role of oil in the economy has reduced the inflation threat of rising prices. We’ll see. Eventually, the effects of higher fuel prices will show up again, in higher prices or smaller earnings.

Demand for Trucking– The single biggest economic influence on the demand for trucking is the volume of goods produced in the economy. Expansion of the economy results in increases in overall freight demand, while economic contractions result in reductions in demand. Things are looking pretty good right now.

Globalization: Over the past twenty years, the U.S. economy has become more integrated into the global economy. Many companies throughout the world are managing worldwide production and distribution systems. Changing patterns of world trade not only affect transport flows, they affect modes used. Products that are received by truck from domestic suppliers may be obtained by containership and double-stack train from overseas suppliers or, if their value is relatively high or delivery speed important, by air freight. Trucking of some kind is involved in order to bring most shipments to their ultimate destination. U.S. trucking companies have been well served by adopting new product development strategies, in order to prevent the erosion of their business at customers seeking out the services needed by customers receiving shipments from overseas.

Pricing Power – Recently, companies in some U.S. industries have been able to increase their prices, due to increased domestic and global demand. However, pricing power remains limited in the trucking industry, given strong competition, although spare capacity has now been eroded. Trucking companies may finally be able to make their price increases stick.

Written by Patrick Ryan, BestTransport, Inc.