If there’s one thing that’s certain right now, it’s that the trucking industry is awash in uncertainty. Unlike other transportation providers, the trucking industry is battling numerous and unpredictable variables ranging from labor to regulations to fuel prices, all of which are making the fleet manager’s job ever more challenging.
A host of variables in the market
A shortage of qualified drivers has been a concern for the industry over the past few years, but with the advent of new and stricter regulations, the problem is bound to get worse. Furthermore, it’s putting a tighter squeeze on capacity.
“We’re in a tight capacity market right now,” acknowledges Derek Leathers, CEO of Werner Enterprises. “The driver shortage is becoming more real and it’s becoming increasingly more difficult to obtain and attract quality drivers.”
Adding to the capacity constraints is the overall financial climate in the industry, which is keeping new entrants on the sidelines, says Leathers. Thirdly, are government regulations, he says.
“All three have a net effect of limiting the growth of capacity, but in our opinion, the result is actually a net capacity reduction.”
The impact of government regulations alone are a huge challenge for the industry, in part because there have been revisions of key regulations over the past few years, and there are likely to be more changes ahead.
In December, the Federal Motor Carrier Safety Administration (FMCSA) issued revised hours of service rules, which prompted a mixed reaction from the trade community. Although many were bracing for a more dramatic overhaul, that doesn’t mean that the latest revisions aren’t causing some anxiety in the industry.
CSA, or the Compliance, Safety, Accountability initiative, is the other moving target on the trucking industry’s radar.
“We believe there are still some fundamental issues with the program,” Werner’s Leathers explains. The initial effect of CSA was to unnecessarily “cleanse drivers from the network,” he says, even though for many there wasn’t a correlation with safety. Secondly, it added costs, says Leathers, especially in the area of maintenance. He gives several examples, such as “pulling tires off 1/32 too early, or opting to fix lights where the truck is sitting rather than getting it to the next port in your network where it can be done by your own mechanics.”
These “add up to maintenance ‘cost creep’ for carriers, and that’s definitely been a negative under CSA,” says Leathers.
State regulations are impacting the trucking industry, too. The California Air Resources Board’s (CARB) Transportation Refrigeration Unit regulation is one example, and it has a significant impact on food shippers and carriers alike.
“You can’t be in the temperature controlled space and not operate in California,” concedes Leathers. But, the cost of compliance is stiff, which further hikes up operating costs.
The obvious question on shippers’ minds is how will all the turmoil in the industry affect rates?
According to Leathers, “Whenever rates are in play there’s always a bit of gamesmanship, potentially on both sides of the desk.” Yet, the climate is less contentious than in prior years, he points out.
“I think shippers are very realistic now and they understand that our cost pressures are real and they’re not going away. Overall, the dialogue [with shippers about rates] has been very open.”
Leathers believes the key to weathering the storm lies in collaboration between shippers and carriers, which can ultimately lower costs even as rates are going up. “There’s never been a more important time to collaborate,” he emphasizes. “Costs are absolutely going up from the carriers’ perspective and some of those are going to have to be passed on to shippers. The question is: ‘How do you mitigate them?’ In our experience, there’s still plenty of planning optimization and design work out there to offset the rate inflation that is inevitable. And, now’s the time for shippers and carriers to get serious about it.”