With capacity tight and labor stretching for truck drivers, carriers can be selective about who they work with, so it’s important for shippers to have a game plan. Here are practical ways to ensure your shipment gets to where it needs to go.
In August 2021, Cass Information Systems reported that the index for shipments in July 2021 was 1.177, or 15.6% higher than in July 2020. This type of number usually falls into the normal range of the index, which measures freight shipments within the continent by rail and lower of truckloads in North America. this year,
It was the lowest level in five months.
The limited availability of truck drivers and equipment played a large role in the economic downturn. “Shipment volumes remain largely limited by the capacity of the shipping network,” according to the CAS report.
There is no way to cover it with sugar. 2021 brought a major capacity crunch, particularly in the trucking sector. Here are some issues… and coping strategies.
Trucker employment stretched thin. A major contributor to the capacity crunch is the downturn in the driver pool. From February to April 2020, truck employment fell from 1.52 million to 1.43 million, according to the Bureau of Labor Statistics (BLS). As of July, that number has recovered to 1.49 million, but the industry is still 33,000 workers shy of pre-pandemic levels.
A combination of factors led to this decline, including a lack of commercial driver’s license (CDL) training last year.
“Broad estimates are that there are 40% fewer CDLs in 2020,” says Avery Vais, vice president of trucking at FTR Transportation Intelligence, a freight consulting firm in Bloomington, Indiana. “Most driving schools have social distancing requirements, so while you might have trained three drivers once in the past, you may now only be able to train one.”
Another consideration is the FMCSA’s Drug and Alcohol Exchange. The central database, set up in January 2020, keeps a record of all drivers who have tested positive for drug use. Since its inception, the program has flagged more than 70,000 drivers for drug or alcohol offenses. Although there is a return to work process, most drivers have not taken advantage of it; Only 10,000 drivers have started the process, Vis says.
“There are still about 60,000 banned drivers,” he adds. “That’s good from a safety standpoint; we don’t want those drivers on the road. But it adds to the challenge of keeping the seats full.”
The biggest challenge to road trucking recruitment comes from a growing competitive industry. Both parcel delivery employment and its warehousing counterpart took sharp upward turns in the middle of 2020 and remained high through 2021. Courier employment exceeded 1 million people for most of 2021 and warehouse jobs exceeded 1.4 million since October 2020, according to BLS data.
Equipment not available. The driver pool wasn’t the only handicap that carriers faced in 2021. Trucking companies had to contend with a shortage of equipment, which was exacerbated by the backlog of microchips.
“The chips that go into trucks aren’t available, so manufacturers can’t make enough trucks to meet demand,” says Greg Price, CEO and co-founder of Texas-based Chipwell Platform in Austin, Texas. “Even the used truck market is on fire right now.”
On top of these challenges, the rapid shift towards e-commerce, combined with the constant restocking of inventory, is making the freight market extremely tight. Consumer spending in the second quarter of 2021 rose 4% to 7% above 2019 levels and within this category, e-commerce hovered at least 35% above pre-COVID levels, according to a McKinsey & Co. report. for the year 2021.
“We are in Mount Rushmore for shipping cycles,” says Kevin Stirling, vice president of strategy at XPO, a Greenwich, Connecticut-based freight carrier.
Shippers game plan
In this environment, carriers can be selective about who they work with, so it’s important for shippers to have a game plan. Here are some suggestions to keep you in the driving seat.
Take care of truck drivers. It sounds simple, but making sure the facility is attractive to truck drivers can go an extra mile with carriers. Clean restroom facilities, restrooms, WiFi access, and adequate parking can all help an organization stand out from the drivers.
It also helps reduce driver retention whenever possible. Drivers are aware of the time they spend sitting.
“You want to make it easy and accessible for truck drivers to get into your facility to get there quickly and efficiently,” Stirling explains. “Truck drivers don’t want to sit idly by in the distribution center. They want to be behind the wheel, on the move.”
Driver retention is a major concern for truck drivers, especially after COVID, according to a Workhound 2020 survey. It cuts their service hours, ultimately reducing profits or missing out on other loads.
In the end, it all makes drivers feel respected. “Surveys looking at what can make truck driver jobs more attractive show that pay is always number one, but respect is the second,” Stirling says. “Truck drivers want to be respected for the hard work they do.”
Uprooting organizational shortcomings. The good news is that shippers can take steps within their organizations to relieve some of the stress caused by limited capacity.
“Transportation is the last stop in the supply chain and upstream challenges often find their way into it,” says Matt Anderson, Director of Logistics-as-a-Service at BluJay Solutions, a transportation management platform in the Netherlands, Michigan.
To meet these challenges, you must have systems in place to facilitate communication between teams.
“Is there an internal mechanism for cross-functional conversations with customer service, order planning, and warehousing, to understand the upcoming changes?” Anderson says. “Do you expect an increase in production that will increase the load on the warehouse?”
You can also take advantage of the capacity that already exists. “From a process standpoint, make sure you take full advantage of your existing capacity,” Anderson says. “Do you fill trailers when you can run interplant motions? Is there a mechanism in place to review order-to-shipping phases and reduce jams?”
They help distribute volume and give carriers a sense of upcoming shipping needs whenever possible.
“Sailing schedules and cargo adjustments, for example, provide consistency for carrier partners,” Anderson says. “It gives them a field of view of what’s coming so they can better align their capabilities with the upcoming demand.”
Work with a variety of carriers. “The first thing shippers should think about is whether they secure capacity from an asset-based carrier that provides trucks versus a non-asset-based provider or broker,” says Jason Miller, associate professor of logistics at Michigan State University. .
There are pluses to each. There is a cost advantage to working with asset-based carriers, but brokers have more capacity at their disposal, which can come in handy when demand outstrips supply. “Shippers need a combination of the two,” Miller advises.
Equally important is the use of a mix of carriers based on size and region.
“Shippers with sufficient intensity to conduct an annual RFP should formulate a carrier strategy consisting of strategic, national, regional, and specialty carriers,” recommends Jack Gerstner, senior vice president of Coyote Logistics based in Chicago, Illinois.
“Small freight forwarding companies can collaborate with carriers who can provide on-demand quotations, tenders, tracking and settlement via a digital platform,” he adds.
Technology is your friend. Logistics has come a long way since the days of fax machines. Today, technology has become a “must have” rather than a “fun thing”. A transportation management system (TMS) or other visibility solution can give shippers a window into inventory movement and a way to find more carriers.
“Many shippers still use a local function or manual spreadsheets,” says Brian Zerbs, business product owner at BluJay Solutions. “Their basic foundation is to have TMS in place, preferably cloud-based so that they can access a network of carriers and suppliers.”
The price agrees. “Historically, IT spending has been no more than 2% of transportation spending,” he says. “Logistics had Charles’ character ‘no change.’ That no longer exists.
“For shippers to be resilient, they have to invest in technology and tools to make this happen,” Price adds.
Not only does having the right technology help shippers access a wider network of carriers, it also provides a huge amount of data. Speaking of data…
Take advantage of the data. When it comes to transporting goods, the more information shippers have, the better. This applies to carriers, but can also be useful when reviewing their performance.
When reviewing carrier partners, metrics such as bid acceptance rates, on-time delivery, fallout, and adherence to quotes help the team decide who to work with. This data should be accessible to the entire team.
Price recommends: “Keep all of your data in one place, where the front-line workers who make the decisions can access it.” “For example, pricing information can help you understand how much a shipment should cost for a full truckload versus breaking it up and sending it over the LTL network.”
Benchmarking can turn inward, too. One of the ways that shippers can take advantage of the data is to make sure that their level of performance passes firmly with the carriers.
“Shippers of all sizes should take advantage of industry thought leadership to understand where their business stands in relation to the general market in terms of cost, quality and service,” Gerstner advises.
Once shippers are aware of these standards, they can take action to improve preference with service providers in their networks.
Cultivate relationships. Ultimately, no amount of analysis can replace the relationships between shippers and carriers. Service providers are looking for companies they can partner with for the long term, not a one-time transaction.
“Establishing a structured program for evaluating the performance of carriers can be helpful,” Anderson says. “Discuss collaborative solutions with carrier providers and get feedback on the shipper process from their perspective. Carriers want this two-way collaborative approach.”
Anderson suggests implementing a scorecard program and rewarding good behavior to whatever extent possible. “This will go a long way with carriers and allow shippers to take advantage of the capacity they have,” he says.
There are also some tactics that shippers should specifically avoid. A big guy is trying to manipulate the market cycle.
“Make your annual purchase auction at the same time each year; don’t move it based on market conditions,” Miller says.
“Let’s say the service provider’s new rates go into effect every April. If you delay the auction until June or July in the hope that the market will cool down, the carriers will remember it. It creates a bad sense of inequality.”
In today’s environment, access to carriers is not as easy now as it used to be. Fortunately, there are practical steps that shippers can take to ensure their inventory is moved.