“The over-arching theme is pretty straightforward,” says Patrick Burnson, Executive Editor of Logistics Management. “The steadily expanding global and domestic economies will be pushing rates up across every mode, while capacity will become even more constrained. It’s as simple as that.”
While it is true that an improving United States economy has caused freight volumes to increase, depleting capacity, it has combined with a nationwide driver shortage, the new Electronic Logging Device (ELD) mandate, heightened fuel surcharges, and extreme weather to send freight transportation rates to record-breaking heights in 2018.
When the Institute for Supply Management (ISM)’s index of national factory activity reads above 50, a growth in manufacturing is indicated; in December 2017, the index read 59.7, the second-highest reading in six years. Steve Graham, a trucking industry analyst at FTR Transportation Intelligence, reports that he “he expects real gross domestic product to continue accelerating from 1.5 percent growth in 2016 to 2.2 percent in 2017 and to reach 2.8 percent in 2018” [http://bit.ly/2nGuRnP].
A growing U.S. manufacturing sector results in increased freight volumes, greatly constraining U.S. carrier capacity. While – responsively – trucking companies are hustling to grow their fleets, they’re beholden to irregularly in-demand truck manufacturers and the current U.S. driver shortage, meaning that there is no telling when the capacity crunch will end and freight transportation rates will normalize.
While some trucking companies have increased their fleets in response to the surge in demand for capacity, they remain limited by a lack of qualified drivers. Derek Leathers, President and CEO of truckload carrier Werner Enterprises, the sixth-largest truckload carrier by revenue in the U.S., reports that while they received more than 100,000 applications for truck driving jobs in 2017 alone, only 2.5 percent of those applicants met Werner’s hiring standards. Brad Delco, a research analyst at Stephens Inc. reports “We believe the real supply constraint in the industry is truck drivers” [http://bit.ly/2nGuRnP].
Why are qualified drivers so hard to come by?
Without qualified drivers to operate the growing fleets of trucking companies, capacity will remain constrained and freight transportation rates will remain high.
On December 18, 2017, the Federal Motor Carrier Safety Administration’s (FMCSA) Electronic Logging Device (ELD) Mandate went into effect, requiring drivers to use ELDs to record their hours of service rather than paper logbooks.
For the safety of drivers and others on the road, the FMCSA’s Hours-of-Service (HOS) Regulations limit the amount of time drivers can spend in transit before they must take a break to rest. Prior to the ELD Mandate, many drivers “cheated,” driving more hours than allowed or logged. Now that their hours of service are electronically monitored, these drivers are forced to spend less time in transit.
ELDs have decreased the productivity of drivers who respected HOS Regulations prior to the ELD Mandate, as well. With an increased number of resting drivers, available parking spaces have decreased, causing drivers to begin looking for parking hours before their service window ends to avoid being stuck roadside. Noel Perry, Chief Economist at Truckstop.com, estimated that – when combined with the driver shortage – the ELD Mandate has lowered productivity by around 10 percent fewer miles or $100/day, keeping freight transportation rates high [http://bit.ly/2EJsKH9].