On June 3, Stifel Nicolaus hosted a conference call about the current state of demand and supply of truck drivers featuring Gordon Klemp, the founder and President of the National Transportation Institute (NTI). NTI studies truck driver availability, compensation, turnover, etc. The supply of drivers has dwindled and will continue to shrink leading to higher driver pay, capacity shortages, and rising TL prices. Mr. Klemp makes many valid points.
About 25% of the driver workforce has been eliminated in the last 10 years due to demographics and health issues. Over-the-road truck driving is a strenuous job with weeks at a time spent on the road sleeping in the back of the truck. Some of the large TL carriers have indicated to me that the average age of their drivers is between 55 and 60 years old. Mr. Klemp believes that CSA will eliminate about 2% of the driving population with 6% of the drivers flagged as undesirable but two-thirds of those being successfully managed to desirable levels. He also believes that if the proposed hours-of-service rules are adopted TL driver productivity will be cut by 15%. That is on the high end of other estimates I have heard which peg the loss at a still unacceptable 5-10%. Mr. Klemp also sites carriers moving to hair follicle pre-employment drug screening which he indicates could eliminate an additional 10-15% of applicants compared to the less reliable urinalysis drug screens. Driver training schools and driver recruiting teams have been dismantled during the recession and will be slow to start up, further constraining supply.
Regarding driver pay, Mr. Klemp reports that private fleet drivers average $65-$70k per year while TL carriers' drivers typically earn $48-$50k. Some TL carriers also reduced pay during the recession. He sees a 3 to 5 cent per mile increase in TL driver pay over the next 12 months as capacity tightens.
So what can a shipper do to mitigate the coming capacity shortage and TL price increases. It all starts with network strategy – how many DCs and where they should be located to minimize total logistics costs while improving customer service. A smart network strategy can maximize the potential for intermodal and private or dedicated fleets that will have better cost characteristics than over-the-road trucking. Shorter-haul TL costs will increase more slowly than long-haul TL costs because the shortage of drivers is not as great and driver pay is lower. Multi-shipper collaborative dedicated fleets and co-loading opportunities are great choices for the innovative. Excellence in transportation procurement and execution are also critical in beating the averages. Finally be carrier and driver friendly. Honor your commitments to carriers and they will honor their commitments to you. Make the loading and unloading process driver friendly. Under the new rules, the penalties for poor utilization of drivers will increase substantially. It will take a great deal of creativity and discipline to provide excellent service at a reasonable cost as TL capacity tightens.