The economy is starting to recover from years of dismal outcomes, and this means the demand for shipments of all types of products is up. The recent employment changes have also begun to register and this has set off a huge boom in the trucking world. This is a great thing for businesses as they saw the best holiday season in years, but it is also a challenge as trucking companies become overwhelmed by the demand.
It is a huge positive that local businesses saw an increase in sales for the end of 2017, but now they are pushing to re-fill their shelves without the trucks available to get their products from warehouses to retail stores. There is a nationwide shortage of trucks, and it may take up to two years to ramp up enough to meet the changing demands.
Several factors pushed the trucking industry into this shortage. The first being the fact that business is growing in many parts of the country for retailers and this has bumped up their requests for shipping. According to a recent report about the shortage:
“Freight volumes in December hit near-record levels for that time of year, on the back of a strengthening economy. Retailers are replenishing stocks after one of the strongest holiday sales seasons in recent years. Manufacturers are also shipping more cargo; in December, industrial production had the largest year-over-year gain since 2010, according to the Federal Reserve.”
The truckers are hit hard as requests for more shipments come in because they are often not only delivering directly to the end retailers but also shipping between raw materials plants, manufacturing plants, and storage warehouses. The trucking industry often touches products at various stages of manufacturing and sales. A request for more products can mean they need multiple drivers in several states to support the larger group of products.
Beyond the strengthening economy, winter storms also played a role in the trucking shortage. January is traditionally a month with lower shipment volumes, but this slow-down did not happen this year. Poor weather conditions in December and January all but stopped shipments in many parts of the country. This combined with changing federal safety standards pushed back many shipments dates well into January. Most companies were not prepared for a rush in what was to be an extremely slow month historically.
Another issue holding up the trucking industry is related to changes in the way many companies use trucks. Many years ago retailers depended on schedule and predictable deliveries with one or two companies they are contracted with. This type of system allows both the customer and the shipping company to plan for the number of trucks and drivers they need at any given time.
With many retailers looking to compete with online sales that offer quick delivery, they have turned to “spot market” use of trucks. Instead of scheduling distribution for the same time of the week every week, they are now relying on short notice deliveries. This is an on-demand system and much harder for trucking companies to predict.
Spot markets for trucking also tend to use smaller trucks, with the most popular rig being the dry van. If deliveries are regularly scheduled using bigger vehicles, a driver may be able to group shipments in similar areas into one truck, but this is much harder to do with spot market requests. This leaves shipping companies using more vans which means more drivers as well.
It is not unusual for many trucking and delivery services to hire seasonal workers to meet the higher demands for December. Those jobs usually end before January because of the lack of work in that month. The winter storms and a profitable December left a gap between what the predicted volumes for January were and what they ended up being.
During the week of January 20th, there were ten requests for dry van deliveries for every available van in the United States. This number is usually three or less during January. Shipers were overwhelmed with the demands, and it seems there is no end in sight.
Because there is a more significant demand for the spot market deliveries, prices jumped 20% for the service. Companies are resorting to extra fees in extreme cases to push delivery requests to the front of the line. The contracts for regularly scheduled deliveries are also increased over last year, with many higher by 5-8%.
For those outside of the trucking industry, the answer to the shortage seems to be easy. The idea being if the companies need more trucks they should buy them. This is not as easy as it sounds as each company needs to be able to support buying new vehicles over the long-term. The commitment to have a more extensive fleet can take months or even years to fulfill.
Because of the current shortage, many shippers have become more stringent when it comes to who they work with for deliveries. Their resources and time are limited, so a company that has long waits at a warehouse for loading may not get picked up by a busy shipping company. The type of relaxed business practices at many retailers may leave them without a shipper at all.