January 2011 | Commentary | Viewpoint

How the Driver Shortage Impacts Capacity

Tags: Trucking

Joe White is CEO of CostDown Consulting.
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It is likely that a driver shortage is coming, due to pressures such as an aging driver workforce, the Department of Transportation’s (DOT) Compliance Safety Accountability program, and the anticipated DOT-mandated reduction in driving hours. Yet many supply chain professionals have yet to grasp how a driver shortage impacts capacity.

Simply put, a driver shortage creates high driver turnover rates, which have a more negative impact on trucking capacity than the shortage itself.

Turnover’s Impact On Capacity

Here is a scenario that illustrates the impact of driver turnover on capacity: At 100-percent turnover, XYZ Trucking, with a fleet of 150 drivers, has to hire 150 drivers each year. It takes time to recruit, interview, hire, and train new drivers. Once they start working, it takes even more time for drivers to become productive because of the learning curve associated with new routes, customer requirements, and company policy.

This new-employee penalty results in approximately 90 lost work days for each driver replaced. Replacing 150 drivers therefore results in XYZ Trucking losing a total of 13,500 work days each year.

A full-time productive driver works 255 days a year. Divide 13,500 total lost work days by 255, and XYZ Trucking loses 53 drivers worth of production each year. Subtract 53 from its 150-driver fleet, and its effective driver count falls to 97 drivers.

In summary, at 100-percent turnover, XYZ Trucking’s 150-driver fleet is only doing the work of 97 full-time drivers.

During a tight labor market, drivers can quit one trucking company and start at another the following week. Safe drivers, knowing they can get a job anywhere at any time, will quit an employer for the smallest of frustrations or hire on at a new employer if compensation or working conditions are perceived to be even slightly better. If they are dissatisfied with their new employer, their original employer will welcome them back, often without disruption of seniority or benefits.

What’s In Store

The last driver shortage spanned from 2005 to 2007. In 2005, the trucking industry was 20,000 drivers short, according to Global Insight, a market intelligence firm. Current forecasts for the next shortage range from 200,000 to 400,000 drivers.

When we were 20,000 drivers short, turnover peaked at 136 percent for large truckload carriers. How high will turnover soar when we are more than 200,000 drivers short? And how low will effective driver counts drop?

Searching For the Solution

We can’t change the influences that will force a driver shortage. The shortage will come. Collectively however, as truckers and shippers, we can reduce its impact.

Trucking companies need to focus on driver retention. While that may seem a simplistic conclusion, too many carriers still focus resources on recruiting. The best source of driver labor for any trucking company is its own fleet. In the XYZ Trucking example, dropping from 100-percent to 75-percent turnover would increase effective driver counts by 13. If drivers averaged 100,000 miles per year, XYZ Trucking would gain 1.3 million miles of annual capacity.

Driver retention programs are complex to implement and manage, yet their solution is based on the simplest premise: building employee loyalty. But building loyalty takes time.

Unfortunately, too many truckers get serious about retention only when the crisis arrives and will be starting at the beginning of the loyalty curve.

Making Drivers Want to Stay

Developing an effective driver retention program includes providing competitive compensation and benefits, adequate home time, reliable equipment, consistent communication, productive working conditions, and respectful treatment.

Shippers need to understand what they can do to help. Perhaps the biggest opportunity is expanding pickup and delivery windows. Just-in-time or shipper-convenient deliveries have been capacity killers for trucking companies.

For example, an 8 a.m. to 11 a.m. delivery widow could force Driver A to drive through a large metropolitan city during congested rush hours. Another shipper with the same window for pickup 100 miles away would force a trucking company to send a second driver to cover the load even though Driver A may be the closest, and therefore most productive, choice.

If both windows were expanded to six hours each, say 7 a.m. to 1 p.m., Driver A could handle both assignments— and in a more productive and capacity-effective manner.

A Look at the Options

The past several years have made heroes out of logistics professionals and third-party logistics providers as the recession provided a hammer to significantly beat down transportation costs. That will change as limited capacity, higher rates, and driver-friendly attitudes force truckers to take a serious look at shipper and lane alternatives.

The message from trucking companies will come through loud and clear. Delivery windows too restrictive? I don’t want that freight. My drivers have to wait or help unload? I don’t want that freight. No backhaul potential with that lane? I don’t want that freight.

Tomorrow’s logistics heroes will be supply chain professionals who successfully shift their focus from transportation spend to transportation assurance. They are going to work hard to make their companies the shippers of choice for truckers with limited driver resources.