When it comes to prognosticating, perhaps the four most dangerous words a forecaster can utter are “this time it’s different.” If history has anything to teach us, it is that the past is prologue and pronouncements that fundamental change is underway often turn out to be more wishful thinking than prediction. The North American supply chain is now in the teeth of a substantial shortage in truck capacity. The question is whether this is a normal cyclical event or if more profound change is underway. Other considerations are how long the current situation will last and what the world will look like when things return to “normal”.

Earlier this month I had the good fortune to participate in the University of Denver’s Capstone Executive Seminar, which gave me the opportunity to listen and discuss the situation with a number of very well-placed trucking and intermodal executives. The conversations provided plenty of food for thought, including what the ingredients of the current shortage are and how they might differ from previous cyclical events. Although I am not yet convinced that “this time it’s different,” the list of factors pointing in that direction is quite impressive.

A level playing field

Now that the electronic logging device (ELD) mandate is the law of the land, we are well on the road toward a level playing field where all truckers play by the same rules. It stands to reason that those who have delayed implementation to the last minute were the ones who felt they had the most to lose. The full impact remains to be seen, but even after the inevitable adjustment period, productivity will not get back to where it was prior to the ELD era, because yesterday’s truck productivity had a certain percentage of illegality baked in that will never return.

The ELD information revolution

The late Senator Daniel P. Moynihan, D-N.Y., once famously said, “You are entitled to your opinion, but not your own facts.” But when it comes to shipper/carrier discussions, facts historically often were in short supply, with discussions devolving into mutual finger-pointing as to the real causes of delay. With the onset of ELDs, the facts of the matter will be plain to all. Carriers will know exactly how much time their trucks and drivers are spending at origin and destination and will bring that data to bear in their discussions with their customer base. The end result will be a permanent change in the way shippers and carriers interact and much non-productive waste will end up being boiled out of the system.

Free surge capacity is history

One byproduct of the relentless search for improved productivity has been a willingness to operate at ever-higher levels of capacity utilization. Simply put, today no one is willing to provide surge capacity without compensation. The net result is diminished capacity for the system as a whole to absorb disruption, be it a weather event or unexpected growth.

Competition for drivers 

Although carriers have always competed fiercely for drivers and much of the sky-high turnover rates frequently cited is actually “driver churn,” with drivers cycling from one carrier to another, there is another, more fundamental competition under way. That is the competition between the commercial heavy-duty driving profession and alternative careers. Hurricane-ravaged areas of Texas and Florida have plenty of well-paying construction/rebuilding jobs available. Growth in housing and commercial construction are also soaking up potential drivers. In addition, a resurgence in fracking, due to higher oil prices, is also demanding its share of drivers, at oil-patch wages that dwarf those earned by the conventional, over-the-road driver.

The US tax cut 

The recently enacted US tax cut comes at a time where the economy was already growing at 3 percent and unemployment was at 4.1 percent. The likely effect will be the economic equivalent of feeding a five-year-old a chocolate bar at 10 p.m. Although the long-term hangover may be painful, in the near term, we can expect to see further acceleration, which will only exacerbate the competition for trained, blue-collar labor (i.e., drivers).

The autonomous truck threat

Paradoxically, the long-run potential of autonomous trucks may hurt things in the near term. Although truckers generally felt that autonomous trucks were not “around the corner,” preferring the term “driver-assist” to autonomous, they agreed that the recent publicity around the autonomous truck was hurting current driver recruitment efforts. After all, it is unlikely a driver would want to go through the special training needed to master the art of driving a big rig when the news is reporting that those skills will be obsolete in a matter of a few years.

A shrinking driver pool 

Setting aside the well-known demographic challenges of today’s aging driver base, there are a couple of special circumstances to consider. One is the immigration debate. Just what percentage of the driver population is undocumented is not exactly known, but anecdotally, the number is significant in certain sectors, including port drayage. With current federal policy forcing more of these individuals underground, the effect on port cartage should be considered. A second factor is the drug situation. More states are legalizing marijuana as time passes, but the drug-free requirements for a commercial drivers license remain unchanged. Further, the inevitable onset of hair follicle drug testing promises to bump the already-high failure rate into the stratosphere.

History says the market will eventually adjust and rebalance. An adequate number of drivers will eventually be found after wages adjust (upward) sufficiently to generate supply. In the meantime, as wages and prices move skyward and candidates work their way through the rigorous qualification and training process, the shortage will endure. Although currently there may be just a bit of easing, from a seasonal perspective, the looming double-whammy of ELD enforcement beginning April 1, plus the normal second quarter seasonal peak promises a new round of pain for shippers on the horizon. The extensive list of contributing factors tends to lead towards a conclusion that the shortage will be a long one, stretching well into 2019. Further, when the shortage does begin to ebb, it appears that the “new normal” will look quite different from the normality of yesteryear.

 

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