To quote the Grateful Dead and their song “Truckin’” — an apt choice for this topic — “What a long strange trip it’s been.”
While a significant number of trucking companies have gone out of business, there are trucking shortages and rising wages.
The trucking shortage is now in the tens of thousands of positions, according to American Trucking Association Chief Economist Bob Costello, as reported by USA Today. The shortage could top 100,000 drivers in five years and 160,000 drivers in 2028.
One reason for the shortage has been that truckers are retiring, and fewer replacements are coming on board, so to speak.
A shortage of trucking impacts the timeliness of supply chains, of course. USA Today noted that in the midst of a shortage, extant companies would likely want to service larger companies first, which would have a trickle-down effect. Wouldn’t it stand to reason that smaller trucking firms would be able to jockey for the business?
“Since the economy got back on its feet, every sector of the economy is facing a qualified worker shortage,” said SC Trucking Association President Rick Todd, according to the publication. “It’s a societal problem.”
And yet, Supply Chain Dive reported this week that the number of trucking companies that have shuttered has more than tripled so far in 2019 to 640 trucking companies, according to data from Broughton Capital.
The companies themselves are larger in terms of fleet size, which now averages 30 trucks, as compared to nine last year.
Operating costs are up, and spot pricing is down. Spot pricing speaks to near-term (and sudden) demand, while wages have been higher to attract talent. Many firms invested in equipment — the trucks themselves — and those costs are not being covered by top lines.
Donald Broughton, the principal and managing partner at Broughton Capital, told Supply Chain Dive that larger freight and trucking operators, such as FedEx Freight, XPO Logistics and Old Dominion Freight Line, have embraced technology that leads to operating agility (and perhaps real-time pricing agility) that cannot be matched by smaller peers. Call it competitive advantage at scale.
One wonders what the impact would be should trends continue, and smaller trucking companies continue to go by the wayside. The implication would be that pricing power, wage growth and demand for truckers would all be concentrated with the larger companies. Might the smaller firms continue to be squeezed in a seemingly vicious cycle?
In addition, as the overall shortage continues, freight costs may make it all the more expensive to get items delivered. The costs ultimately, eat into consumers’ pocketbooks.