The weather earlier this week prompted me to think about supply chain disruptions. Much of the country was effected by the storm—the likes of which has not been seen in decades. The resulting high winds, gusts, snow and tornadoes closed airports and interstates, and generally disrupted travel.
But while the weather usually only disrupts the supply chain for a few hours or possibly days, there is another disruption on the horizon. An article I read yesterday on the SupplyChainBrain website explains that this new, larger, disruption is, instead, a truck driver shortage.
How bad could the situation get? Tom Nightingale, chief marketing officer at Con-way, a freight transportation and logistics services company, believes that the truck driver shortages of 1983 and 2004 could be dwarfed by what’s potentially coming by 2012. In addition to an on-going driver shortage that delays some deliveries, new hours-of-service rules and Comprehensive Safety Analysis 2010 (CSA 2010) regulations that will kick in later this year are sure to make the situation more challenging.
The good news, is that if the economy is indeed rebounding, it will take up the extra capacity that the industry had during the recession. On the other hand, many companies slashed their fleets and workforces to weather the recession, and they are now feeling the consequences.
An article that ran in USA Today last month explains that many firms are struggling to beef up fleets and staff. Thousands of older drivers retired when they were laid off or saw their workloads cut. And despite unemployment hovering at around 10 percent, it’s difficult to attract younger workers to a job that typically means being away from home for weeks at a time and features a salary of approximately $38,000. The result, is that there are now 142,000 fewer drivers than there were in 2007.
Take that situation, and then factor in the impending government regulations, and the industry will see a dampening effect on capacity, Nightingale says. While its effect is somewhat nebulous, the hours-of-service regulation is sure to shrink capacity because it will limit the number of hours drivers can work. Secondly, and much more certainly, CSA 2010, which will make it tougher to hire drivers with poor safety records, could take as much as five percent of truckload capacity out of the marketplace, he says.
The result, say many analysts, is that that the industry could see a loss of 400,000 drivers by 2012. Nightingale even goes so far as to say the situation is of far greater magnitude than the crisis of 2004—and that’s when freight was abandoned on docks.
So, given all those factors, the critical issue for shippers then becomes identifying ways to best prepare for those conditions. Among other things, they need to negotiate fair contracts with providers right now. Nightingale says that customers who were willing to keep carriers busy at a fair rate in 2004 were much more likely to get service than those who tried to lowball their providers.
Additionally, shippers should avoid causing unproductive detention and demurrage. Drivers want to keep rolling, and shippers should be sensitive to that.
In the end, however, pricing power will shift from the shipper to the carrier. Will your organization be ready?