There is no doubt that the trucking industry is facing severe headwinds. Inflation continues to hit historic highs, surging 9.1% over the 12 months ended June 2022. Truckers has been acutely impacted by inflation as tractor and trailer values climbed to record levels in 2021 and continue to hold steady in 2022. For late model trucks often favored by owner-operators, auction pricing through June 2022 was still 68.9% higher than the pre-pandemic peak in 2018. Carrier and broker fees continue to climb, putting the squeeze on trucking profit margins in what was already a volatile industry.
Diesel is one of the main pain points of the trucking industry. Fuel prices disproportionately contributed to inflation, spiking 59.9% over the same 12-month period, reflecting dual pressures from an increase in global oil prices and a decrease in refining capacity, something that no small fleet owner or driver could have planned for. Small trucking fleets bear the full brunt of this impact without access to bulk discounted fuel. While costs like maintenance and repairs are traditionally accounted for in owner-operator budgets, unexpected and sustained fuel price increases are not. Larger fleets have access to subsidized fuel pricing, but 97.4% of fleets in the United States are 20 or fewer trucks, and are getting no relief.
Against this backdrop of inflationary pressures, driver pay continues to remain stagnate. Shippers are also feeling the pain of inflation and pushing back against linehaul increases. This dynamic leaves driver efficiency as one of the few tools to navigate this industry downturn. But consistently matching truck drivers to optimal freight is a shockingly complex challenge. As a result, the trucking industry has always been plagued by excessive amounts of empty miles and idle time when an owner-operator tries to manually connect loads across different markets in the United States. The unexpected spike in fuel prices and the softening of the trucking market have exacerbated this inefficiency, costing trucking fleets most of their earnings and often leading to a race for the exits and into the safe pastures of mega carrier fleets. The remaining small fleet owners and drivers are left to make sense of a seemingly irrational market.
Another overlooked burden of being an independent truck driver are the tasks unrelated to driving. A trucker’s day-to-day administrative work, such as carrier setup, insurance verification, load selection and contract signing are too often operating on outdated, manual systems. It is no surprise that the industry turnover rate has been as high as 94% for large truckload carriers, and nationwide, there is only one driver available for every 12 shipments.
During the last major trucking recession in 2019, hundreds of trucking companies declared bankruptcy, unable to cover the costs of running a trucking company with deflating rates. In April, trucking employment exceeded pre-pandemic levels by 35,000 jobs and remains higher today than it was before it began to decline in the 2019 trucking recession. It’s not a surprise that in the fragile economic environment of the second half of 2022, a “Great Purge” is looming.
The “driver shortage” is primarily a function of poor utilization resulting in inconsistent and low income, which in turn drives qualified CDL drivers out of the industry in droves. The supply chain is so dynamic, it is humanly impossible to optimize drivers’ utilization rates and incomes for a sustained period. As a result, drivers play musical chairs with carriers in search of better income, creating significant driver churn and resulting in inconsistency and unreliability for shippers and brokers.
Reducing administrative hassles and optimizing trucker utilization will make a career in trucking more appealing to the next generation of drivers. Administrative hassles can be alleviated through digitization. But artificial intelligence (AI) can go much further.
AI can be deployed to solve the complex problem of freight matching and driver utilization and to direct trucking capacity to projected shipper demand, which are the key elements for achieving digital transformation for drivers, brokers and shippers. This digital transformation will be capable of delivering operational efficiencies and its attendant benefits across the trucking ecosystem.
By introducing AI and automation into the logistics space, the industry can work to improve driver earnings and workforce retention for generations to come. Not only can AI create more tailored loads, but it can also predict changes in shipping demand and offer reliable and consistent solutions for shippers and brokers.
AI will take the supply chain from digitization to digital transformation, eliminating cognitive overload by automating data preparation, analysis and decision making. Shippers and brokers will experience efficiency gains that translate into significant savings and improved reliability. Small fleets and drivers will experience the same efficiency gains that will translate into increased earnings and better consistency. These enhancements will be critical for the trucking industry to survive the impending recession and to thrive through the next expansion.