By R. Bruce Striegler
The Journal of Commerce recently presented a webcast examining the difficulty that U.S. trucking companies have with driver shortages. Noël Perry, Principal of Transport Fundamentals LLC says U.S. Department of Labour statistics show the number of heavy truck or tractor trailer drivers on payrolls fell by 226,850 between 2007 and 2010 after climbing by almost 165,000 during the previous four years. The stats also reveal that about 42,000 drivers entered or re-entered trucking in 2011.
A shortage of drivers has besieged the U.S. trucking business for more than a decade. It is a cyclical industry that does not attract potential young drivers in numbers the industry once saw largely due to pay and conditions offered. A 2012 report by the American Trucking Association reveals there are nearly 3.1 million truck drivers in the United States, with total industry employment of 6.8 million people, or one in every 19 people working in the U.S.
“Each year, the job of hiring truck drivers gets a little more difficult, because we are not producing as many workers as we used to.” Mr. Perry says that for each person hired, a company must spend about $1,000 in advertising, and invest significantly in time-consuming phone and online activities, emphasizing it takes considerable investment to hire the million or so people required in a good year.
“In a bad year we only have to hire between 200,000 or 300,000 people, but in slow times companies cut their recruiting staff, and then are reluctant to add recruiters when the economy turns around. So the recruiting apparatus gets behind. This is one of the reasons why we have driver shortages. In the long term, the amount of excess capacity we keep to solve this problem gets smaller each year.”
Perry points out that turnover rates for truck drivers varies dramatically in times of expansion or during economically depressed periods, and turnover varies greatly by segment. “In downturns, people don’t quit their jobs, but in upturns they do, since they’re looking for better employment.” He also notes that turnover varies depending upon the industry segment. “If you’re in a private operation, a driver is likely to be home at least once every other night, with many private truckers home every night. If a driver works for a long-haul carrier, turnover becomes much higher, this is where our problem lies.”
Changing regulatory regimes add to shortages
“We also know that in times of regulatory revisions, like in 2004 when hours of service changed, the number of people we have to hire increases. This is because the regulations can disqualify drivers. In the short term this reduces productivity, so we need more drivers to replace those who have been disqualified to drive.”
Regulatory changes effective in 2013 will have further impacts on the driver scarcity. Mr. Perry citing the Federal Motor Carrier Safety Administration’s new rulings on hours of service, electronic logging, drug and alcohol information, and a variety of other proposed regulations. “We will need another 200,000 people to move the same amount of freight,” he says, ‘And it’s almost certain that the hiring bureaucracy will fall behind.”
Perry discussed the likelihood of the employer investing ahead of time to ensure that it does not fall behind in its hiring requirements. He discussed the industry’s willingness to buy tractors, differentiating between discretionary purchases (adding capacity) and discretionary replacements (making the fleet younger), by comparing the current downturn with that of 2003-2005
“We see that those making discretionary additions to their fleet are about half of those that did the last time, and I would be astounded if the conservative people running trucking firms were willing to bet on the economy to purchase excess capacity before it is needed. They’ll almost certainly wait for the shortage to occur, rates will go up and then they’ll say ‘I’m convinced’ and hire more people.”
Effects of rising costs on the marketplace
He notes that with a slower economic expansion this time, and increased regulatory pressures, it is almost certain driver shortages will remain for the next four to five years. “We have a hiring pipeline that is being managed extremely conservatively and will have an effect on the marketplace.” Mr. Perry suggests there are two solutions, aside from not shipping. One is to pay drivers more, and the other is to get the drivers home more frequently. He says that in either case it means higher rates which will have a significant impact on the marketplace.
Historically, between 1950 and 2000, trucking, rail and barge rates fell, but in the decade from 2000 to 2010, rates went up an average 20 per cent. “In this decade, increases will be much greater, and this will come as a shock to people who are used to falling rates.” Perry explained how the cost of equipment, labour, overhead and fuel are raising truckload costs, noting that between 2007 and 2011 increases in the cost of fuel and equipment accounted for over seven per cent, while the cost of labour rose only a little more than one per cent. He projects that in the 2012 to 2014 period, rising labour costs will add about six per cent to truckload prices.
“This creates a difficult choice for the trucking fleet. They’ve already had a year of increasing costs and are afraid their labour costs will go through the roof but they are unsure how to persuade customers to pay more, in addition to last year’s increases. This is a significant crisis.”
Perry says, “we know when we have a weather disaster, costs go up and very quickly the requirement for transportation goes up because people want to rebuild. That need is concentrated on trucking because of its flexibility and service characteristics, so it is certain that trucking will get a big burst of demand as a result of Hurricane Sandy. Given the driver shortage, it will fall behind and there will be an increased shortage of equipment, which will push prices up. We’re looking at a total of about $14 billion in potential additional truck revenues over the next nine to ten months.”
The view from a trucking company
Con-Way, considered one of the largest U.S trucking operations, is composed of three business units. Con-Way LTT (Less-Than-Truckload) has 9,100 tractors, 25,000 trailers and about 19,000 employees. Con-Way Truckload has 3,000 drivers, 2,600 tractors, 8,000 trailers and 150 owner-operators, and Menlo Worldwide Logistics has 145 warehouse locations and 4,400 employees. Collectively, they make Con-Way a US$5.3 billion transportation and logistics business.
Bert Johnson, Vice-President Human Resources and Director of Recruitment and Safety, Con-way Truckload says, “I’d echo the sentiment that increased government regulation by the Federal Motor Carrier Safety Administration’s Compliance, Safety Accountability (CSA) program, the electronic onboard recorder requirements, hours-of-service regulations, the pre-employment screening program and the Equal Employment Opportunity Commission requirements were all implemented for the right reasons, but have all had the unintended consequences of shrinking the professional driver pool.” He says that as well as government regulations, an aging driver workforce, a trucker lifestyle that is less than desirable for most people and legacy driver compensation programs that haven’t changed much over the years, are causing trucking companies to rethink their business models.
Industry says it’s under attack
Adding to the problems, Mr. Johnson says, the relatively high entry age for young people is problematic, noting that to obtain a Class ‘A’ commercial driver’s licence, drivers must be at least 21 years old, which excludes many potential candidates. He continues, pointing to the owner-operator model which has made it increasingly more difficult for drivers to make a reasonable living, given the high cost of equipment and fuel.
“The numbers just don’t add up anymore,” he says. Another area that impacts trucking companies is customer dwell time that cuts into driver compensation, productivity and a company’s ability to run an efficient operation. Bert Johnson said factors such as increased road traffic causes delays, particularly around large metropolitan areas, and crumbling road infrastructure causes loss of productivity and equipment deterioration.
“The trucking industry is under attack from many sides. To remain an economic force in the Unites States, trucking companies must attract new individuals to become professional drivers. First we need to change the perception of trucking, and in doing so create greater awareness of the vital importance this industry to the broader U.S. economy. We need to promote industry programs such as Trucker Buddy or Highway Angels more broadly.” Trucker Buddy International is a non-profit organization dedicated to helping educate and mentor schoolchildren, and Highway Angels presents awards to drivers for good deeds that range from simple acts of kindness to heroic life-saving efforts.
Tackling pay, home time and new recruitment
Johnson says that while some drivers may want to be on the road for weeks at a time, “We need to find a way to allow drivers to get home more often. The time has come to change the way we deal with driver’s home time.” In terms of pay, he says that the industry has paid drivers the same way for the last 30 years, and notes that the only thing that has changed is mileage rates. “Unfortunately, those increases have not kept pace with the rate of inflation or salary increases for non-driving jobs. In fact, driving positions used to be well-paying jobs. Now, they are nowhere near as attractive as they once were, when compared to other professions.” He asks if a solution may be to create a new system where drivers can count on consistent pay week to week. “Is it time for an hourly or salaried wage vs. a mileage wage?”
Mr. Johnson says that until the trucking industry makes systemic changes, the industry will not be able to attract new individuals. In the short term, he says that companies who normally hire experienced drivers are going to have to begin student driver programs, suggesting that a source of new drivers should include the military. “According to government, more than one million service members are projected to leave the services between 2011 and 2016. These are the types of individuals we want in trucking, even a portion of these transitioning military members could help fill the gap.”
He points out that women make up just over 50 per cent of the U.S. population, yet account for only approximately five per cent of the driving population. “If the trucking industry simply doubled the number of women drivers, we could add millions to the profession.” Johnson says the ever-changing U.S. economy has seen jobs leave the manufacturing sector, and the technology or service sectors grow. “There are many people who have been displaced due to these economic shifts, and trucking could be the answer for them.” He adds that Con-Way Truckloads has been successful in recruiting second or third career people from sectors that have experienced chronic unemployment.
As the importance of hiring professional truck drivers grows, Johnson says one other option is to hire from outside the United States. “I see the growth of H-1B visas for professional truck drivers overtaking knowledge workers that use these visas today. We must recruit more professionals to the industry just for sustainability, never mind the growth side.” The H-1B is a non-immigrant visa which allows U.S. employers to temporarily employ foreign workers in specialty occupations.
Drivers are not commodities: focusing on retention
“Trucking companies must stop treating professional drivers as commodities. In the past, if a driver quit a company, the company would simply hire another to replace him. As drivers have been leaving, though, because of retirement, or moving into different industries for better pay, the pool of professional drivers has been shrinking.”
Mr. Johnson says companies must make sure that driver/managers, including fleet managers or dispatchers, are properly trained. “Resources that Con-Way Truckload has identified as critical to retaining drivers include building relationships, teamwork, getting organized, being proactive, attention to detail and being flexible.” He says by ensuring that all driver/managers have the necessary skills, the company has been successful in reducing voluntary turnover.
“Listening to the voices of drivers makes a difference in retention. We employ engagement surveys and driver forums.” The surveys measure how much extra effort and commitment a driver will exert to deliver freight safely and on time. The forums are conducted regularly to provide a mechanism for two-way feedback between drivers and executive management, and Johnson says that neither of these are just listening exercises, but that action is taken based upon the feedback. “Real change needs to take place from these interactions.”
Other programs Con-Way Truckload has implemented include recruiter follow-up calls with Johnson explaining that recruiters must be part of the retention process also. On a 30-, 60- and 90-day interval, recruiters reach back to drivers and their families to determine if everything communicated on the front end of the process actually came true. If not, the company finds out what happened and improves.
Mr. Johnson says that drivers look forward to these calls as it indicates that Con-Way really does care about their success. Additionally, the company has a focus on wellness. “There is a need for wellness initiatives as they sit in their trucks for hours on end. We have exercise routines, healthy eating tips, smoking cessation and weight loss programs. Again, drivers appreciate the interest and it really does show we care about their well-being.”
The company has a number of support initiatives for their drivers, including a program that allows them to move between over-the-road, regional, dedicated and even local positions when circumstances in their lives change. “Communication is critical to retain drivers. That includes smart phones, the Internet, on-board communication devices. There is an expectation that companies provide drivers with information needed to be successful at their jobs. That may include such things as best place to fuel, sound driving directions and a relationship with their dispatch managers.”
“Finally, and most critical, drivers want new, well-maintained equipment. Drivers spend 75 per cent of their life behind the wheel, so equipment must be comfortable, reliable and safe.” He says that in addition to safety technologies such as stabilization control and radar, Con-Way is experimenting with seats that reduce truck vibrations. Early indications are the seat reduces driver fatigue, increases job satisfaction and reduced general physical pain, making the driver feel more refreshed and productive. “We look at this as a game changer in the retention arena.”
Solving the problems
Trucking companies must come together to solve these driver issues, Johnson says. “We need to help drivers understand that the grass isn’t greener on the other side, but that there is just more grass.” He continued, saying that when things don’t go right, communication is the answer. “A partnership of government, trucking companies and customers must be established to jointly solve these problems. It isn’t just a trucking company issue, and there are wide-ranging implications if trucking companies can’t deliver freight when it is needed.”
He points out that government has implemented programs that have cost jobs and feels it is time that it steps up to the table to support marketing and training programs, to bring new drivers to the industry. Similarly, customers need to help to reduce the dwell time that drivers waste loading or unloading, and he says there is a need for increased safe overnight parking areas for drivers with necessary hygiene facilities, especially if the industry is to attract more women drivers. “We’re all working harder to hire and retain drivers but not necessarily making progress. We need to work smarter and think out-of-the-box, and together we can solve these problems.”