All of us rely on the transportation industry. We may not think about how it impacts our lives every day but transportation affects us all, and many of us are unaware that this vital industry is at full capacity.
So what is causing the transportation crisis? There are a few different contributing factors. One is the growing U.S. economy and the increase in consumer demand. Simply said, more people are in a better financial position to increase their spending. Many consumers are also now shopping online, growing the need for fast, efficient transportation. Additionally, the current construction boom and recent natural disasters have increased the need for freight to send aid, supplies and assist in rebuilding damaged infrastructure.
Distribution channels that bring goods to American businesses are struggling to keep up with the current economy, which may hold back their ability to grow. To add fuel to the fire, there is a shortage of truck drivers. As baby boomer drivers begin to retire, about 51,000 more drivers are currently needed to meet the demand from companies such as Amazon or Walmart that are shipping products nationally, according to the American Trucking Associations.
A new factor impacting shippers and drivers is the Electronic Logging Device (ELD) rule. The rule, which is currently being phased in, is intended to create a safer work environment for drivers, make it easier to track, manage and share records, and improve the accuracy of driving times and hours of service for drivers. The ELD rule automatically records driving times, monitors engine hours and mandates how much time a driver can work – meaning drivers cannot take loads that put them over any of the hours of service rules. This has led to dropped loads, drivers refusing trips and the extension of runs if a driver is at his or her capacity for the day.
At a time when trucking capacity is already maxed, the ELD rule is making it tricky for shippers to move freight and is requiring carriers to rethink their distribution schedules. The increasing demand for carriers and the tighter controls have led to higher shipping rates. Higher transportation rates don’t just affect businesses; they trickle down to consumers and result in higher prices across the board. In a Logistics Management survey of 349 freight transportation and logistics stakeholders, 84 percent said their rates were higher than they were a year ago and 57 percent of respondents said securing truckload capacity since the ELD mandate took affect is sometimes a problem. This problem has also extended to international carriers, who have difficulty booking trucks once their containers arrive in the United States.
One strategy carriers are using to meet ELD requirements is charging fines for long load and unload times. For example, if a customer is slow to unload the truck and that puts the driver past his or her eligible work hours, the customer is charged a fine. Using tandem drivers is also a solution. When using tandem drivers, two drivers will go on a run together, allowing one person to drive while the other sleeps in the truck. This tandem exchange allows cross-country loads to keep moving. Additionally, relay drivers make it possible to keep freight moving. Relay trucking can also create better work-life balance for truckers, as it improves their route and shortens their time away from home. Planning ahead and building strong carrier relationships will also help shippers maintain distribution schedules. Even though the need to move freight and the lack of drivers has caused a bit of a perfect storm, we believe it’s a temporary setback and these solutions will help drivers and carriers meet distribution schedules.
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About the Author
Aaron Martens is a Vice President in the Commercial Banking Group for First National Bank. In this role, Aaron supports closely-held and family-owned businesses with comprehensive banking services. Aaron has been with the bank for over 15 years, with the majority of his experience in commercial banking. Aaron received a BSBA from the University of Nebraska Lincoln and an MBA from the University of Nebraska Omaha.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.