September 2017 | Commentary | Checking In

The Economy Will Grow. Is That Bad News?

Tags: Trucking, Economic Development, Transportation, Logistics, Supply Chain

Keith Biondo is the publisher of Inbound Logistics magazine.

For this annual trucking issue, we surveyed both shippers and carriers on important issues impacting the trucking industry. Most importantly, we solicited their views on the state of the economy as we head into 2018. The good news: not one shipper or carrier responding to our survey thinks that the economy will head south in 2018. Last year, our survey reported an unclear economic outlook, with only 24 percent of carriers envisioning a growth economy in 2017.

But some respondents find clouds over a sunny horizon. For anyone buying trucking services, survey results reveal some cautionary observations. Carriers and shippers alike cite HoS efficiency reductions as an issue. Depending on which carrier you ask, ELD implementation reduced logged miles by 5 to 10 percent. An estimated 150,000 small trucking firms will be subject to ELD mandates. Will that result in at least a 5-percent reduction in capacity? Yes. And judging by the driver message boards, many OOs will just park their trucks and walk, further reducing capacity.

Understandably, capacity—and the resulting cost increase—top the list of shipper concerns (see Trucking Perspectives). Forty percent report experiencing capacity shortages, and 79 percent cite reducing overall transport cost as their main concern. Carriers agree by reporting it another way—92 percent say driver-related costs are their number-one concern.

Driver recruitment, retention, and productivity are a big part of that. Considering the positive economic outlook, burgeoning infrastructure investment, building boom in certain areas, and reconstruction efforts due to horrific Harvey and Irma damage, the siren song of good-paying construction jobs for the foreseeable future will likely lure drivers away. Will they come back? The history is not encouraging.

Better technology creates capacity, but enough to matter? I'm not sure. Many observers say that self-driving trucks will ease capacity issues. Given the glacial pace of activity in DC, I'm also not sure self-drivers will be OK'd soon. And will the threat of self-drivers, even if years away, be a career concern and make recruitment of young drivers more difficult today? I think so.

Shippers, brokers, 3PLs, and carriers relying on smaller carriers and OOs will face an operational sea change in 2018. The reality is OOs will get more per mile, driver pay and recruitment and retention costs will continue to rise, technology costs will be passed on, and trucking efficiency will be reduced while all this is sorted out.

So, the economy will grow. Is that bad news? No, it is good news. Imagine if all this was happening and the economy was on a downward spiral.






Visit Our Sponsors