The trucking industry's many moving parts appear to be in dire need of oiling as the sector struggles to align itself in a way that will best meet current and expected future demand. A recent trucking squeeze brought about by economic factors is a major issue—one that has few short-term solutions, according to trucking and logistics analysts.
Although manufacturing activity is said to be on the rise, trucking capacity historically has lagged production recovery and the resulting growth in carrier demand. This tendency has been especially pronounced in the recent upturn as the severity of the recession, as well as the reluctance of carriers to bring more capacity back online in the face of continued economic uncertainty, has resulted in an apparent domestic trucking shortage.
Shipments via truck, which account for 68 percent of the tonnage carried via all modes of domestic freight transportation, has climbed steadily this year. Unfortunately, the number and availability of carriers hasn't followed suit.
The American Trucking Associations (ATA), Arlington, Va., told AMM in June that its seasonally adjusted for-hire truck tonnage had risen for six of the past seven months. The flatbed trucking sector, which handles the bulk of large metal orders, has seen a strong improvement in demand as tonnage ticked up at the start of the summer to its highest level since September 2008. But while transportation demand has increased, carrier quantity hasn't, creating difficulties in all parts of the metals supply chain.
And carrying capacity hasn't simply been taken offline—in many cases, it simply no longer exists.
"One of the reasons we're seeing things tighten up so much is that we had a huge reduction on the supply side during the recession—trucking companies were going out of business and the surviving carriers were downsizing," ATA staff economist Tavio Headley said. And many carriers exported their trucks out of the U.S. market entirely.
There has been a huge drop-off in Class A truck sales, Headley said, and as credit remains tight carriers aren't planning to buy new trucks until sometime next year. "At this point, the carriers don't need them and they can't really afford them," he said, adding that even if carriers look to build capacity, it would take several months to process the new truck orders.
A lack of trucks isn't the only problem plaguing the domestic transportation sector—truck drivers also are becoming increasingly hard to come by, according to a report from the Council of Supply Chain Management Professionals (CSCMP) in Lombard, Ill.
The CSCMP report said that an aging truck driver population coupled with a reduction in trucker pay of roughly 6.6 percent between the third quarter of 2007 and the first quarter of 2010 has had an adverse impact on driver availability. Adding drivers isn't a straightforward process, and in many cases the cost of hiring and training can be quite high. This means that shippers will hold off on actively recruiting or raising wages to attract drivers.
"The shortage isn't due just to a lack of bodies. It's also an HR (human resource) and pipeline issue of getting people funneled into trucks," Eric Starks, president of Nashville, Ind.-based logistics consulting firm FTR Associates, told AMM. "It's not just that there aren't people, it's that the companies can't hire fast enough." In many cases companies have done away with trucking schools and recruiters they depended on for staffing and training needs when times were good, he added.
New regulations on truck drivers could serve as another barrier to the expansion of trucking capacity. The U.S. Transportation Department's Federal Motor Carrier Safety Administration has modified safety and compliance rules to identify and intervene with drivers and carriers who aren't in compliance with safety rules.
The review program fixes the problem of drivers who avoid safety regulations by transferring to a new carrier. Under the old system, employers were unaware of any past safety issues; under the new approach, carriers will be provided with data about drivers' work with previous employers, simplifying the removal of unsafe drivers from the trucking labor pool—a positive for safety, but nonetheless an extra strain in a driver shortage, sources said.
Lack of truck and driver availability aside, Starks sees one other factor behind the backlog margins. "The carriers and fleets don't really have incentives to expand—if they can keep things tight, they can get better margins," he said.