Supply Chain Challenges Part 2: Trucking Industry Shortages: Tech Bound and Down
The first installment in this series discussed the automobile manufacturing industry and the current problems with lack of inputs necessary for production. The trucking industry shares some commonalities with auto manufacturing in terms of solutions but, as a vital cog in the supply chain, it suffers from a different supply issue altogether — labor.
Many of us embraced the joys of restaurant dining again, only to learn that our favorite menu item wasn’t available because “the truck was late this week.” You’ve probably also noticed that the normal two-day waiting period to receive a package via Amazon Prime has stretched out to three or four days.
The surge of full-service dining and e-commerce transactions are both responses to the pandemic, fueled by stimulus funds and pent-up demand. These aren’t the only segments affecting the trucking industry. The currently hot housing market has increased demand for moving truck fleets and for freight capacity to ship building materials such as lumber. These types of demand drivers have caused trucking rates to increase approximately 15% year over year. There simply aren’t enough trucks currently operating to satisfy shipping demand, and the reason for that is labor.
There’s no disputing that the country needs more truck drivers, but there are differing opinions as to the root cause for the lack of labor supply. It’s important to note that COVID-19 didn’t create this problem. In fact, the American Trucking Association (ATA) has argued that there’s been a trucker shortage since the late 80s. The ATA points to demographic shifts and an aging work force where 57% of long-haul truck drivers are over 45 years old and 23% are over 55 (the average driver age is 48). Truckers are also predominantly white and male with a high-school education, among which middle-age mortality rates have increased.
To plug the labor gap, the ATA proposes lowering the minimum age requirement for long-haul truckers from 21 to 18. In stark contrast to the ATA’s perspective, a recent NPR article cited the Owner-Operator Independent Drivers Association’s (OOIDA) position that there is no trucker shortage based on the 450,000 CDL certifications (required to operate a truck) issued by state governments each year.
The OOIDA believes that improvement in working conditions is what is lacking, a point underscored by the 90% turnover rate for long-haul truckers. The job entails long hours and difficult labor, introduces health challenges, and requires long blocks of time away from family, all at a 2020 median rate of $22.66/hour. According to the Bureau of Labor Statistics, truck driving is also dangerous, as one of every seven on-the-job fatalities occurs in the transportation industry (see Figure 1).
Given these statistics, we could ask why 18 to 21-year-olds would want to join the trucking industry when there are other more appealing options. Ironically, one such option is working as an Amazon warehouse team member, loading trucks instead of driving them.
Source: Bureau of Labor Statistics
How do we fix the issue, and how long will the problem last?
Recent sentiment seems to suggest that the solution to the driver issue resides in a better work environment, and that transition is being led by higher wages. The driver pool is increasing with better pay (truck driver compensation is up almost seven percent year over year as of July 2021), and the cessation of pandemic-related unemployment benefits in the Southeast should further bolster the trucking ranks. As pent-up demand is met and consumption switches away from goods to services, demand for shipping will start to stabilize in late 2021/early 2022.
Trucking companies potentially have an altogether different long-term, high-tech solution for the labor issue. Autonomous trucks, once only seen in movies, are now being tested on America’s highways. These vehicles are easier to develop than autonomous cars because trucking routes are generally relegated to highways and are repetitive in nature. As such, they are inherently safer (in principle) than autonomous cars.
Multiple international truck manufacturers are teaming up with startups, tech firms, and shipping companies to develop viable options that eliminate labor concerns related to drivers. For example, Volkswagen is partnering with truck manufacturer Navistar and autonomous solutions provider TuSimple. Aurora, a self-driving technology developer, joined forces with PACCAR, the parent company of Peterbilt and Kenworth trucks. In Europe, Daimler teamed up with Waymo (an Alphabet company) to pursue autonomous alternatives. Fully autonomous trucks are forecasted to arrive as early as 2024, and “supervised autonomous” trucks are currently being tested to refine the technology. Successful development of this technology could revolutionize the supply chain for all sorts of goods.
In our final segment, we explore building materials, specifically lumber, for a different view of the supply chain dilemma. Whereas automobile manufacturing lacks a necessary component like semiconductors, and the trucking industry needs additional labor resources to meet demand, the lumber industry has a vast supply of inputs but lacks the production capacity to supply the final product.
Contact a Synovus Commercial Banker for more details.
What You Should Know About Employee Theft
Companies of all sizes experience fraud. But it’s not always an external attack.
Automated Payroll Benefits
Managing payroll can be time-consuming and full of inefficiencies. Here’s why automation makes sense.
Important disclosure information
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.