The industry’s driver shortage is no secret. About 100,000 seats need to be filled at a time when the pipeline for new drivers is getting thinner. But what’s the practical impact on shippers as this shortage gets worse? In short, it won’t be pretty.
Tighter capacity will lead to fewer choices. Regulations mandating the use of electronic logging devices (ELDs) will result in driver productivity losses of up to 15 percent. Some marginally profitable carriers won’t survive, reducing available capacity. The remaining carriers, including owner-operators, will be more selective about the freight they accept, and shippers will have no choice but to be more carrier friendly.
Adapting to a New Market
On inbound freight, the percentage of no-shows is rising as drivers run out of hours. Warehouses that staffed to receive these incoming loads end up paying idle workers. On the outbound side, loaded pallets accumulate on the dock as transport delays slow inventory turn times. Companies that have cut tens of millions of dollars of inventory through great planning and just-in-time delivery may need to increase safety stock for the first time in years.
Small and mid-sized shippers will need to lock in capacity. Smaller volume shippers are more vulnerable to capacity shortages. They should plan ahead to avoid supply chain disruptions linked to capacity shortfalls.
Inexperienced drivers will lead to more errors, delays, and damage. Some carriers, in an effort to fill seats and avoid turning down loads, are hiring less experienced drivers. While this practice gets freight moving, it creates other challenges such as higher accident rates and more frequent cargo damage incidents.
Site selection criteria will change. Companies that might otherwise favor cost-efficient warehouse locations in rural areas may elect to pay more and locate closer to urban centers to try to maximize productive driver hours.
How to Lessen the Impact
As carriers get more selective about the freight they haul, shippers need to make themselves more carrier friendly in two important ways.
- Create driver-friendly locations. This means eliminating lengthy waits to unload. Retailers have not stepped up to address this problem, despite the fact that such waits have a financially crippling, domino effect on a carrier’s multi-stop schedule. Long waits often mean late-day deliveries must be pushed to the next day to remain compliant with hours-of-service regulations. Third-party logistics providers and carriers have reluctantly tolerated this inefficiency–perhaps because the freight market has been soft. But that’s changing.
Also, create a facility that drivers want to return to. Provide clean, accessible bathrooms and a driver break room. When drivers are treated with respect at locations where pick-ups and drop-offs happen quickly and easily, they will want to return.
- Build longer-term relationships with carriers. Many shippers continue to shop out their lanes through yearly RFPs in an effort to save money. This is the freight equivalent of speed dating and the savings are illusory. Longer-term contracts give carriers time to mine for other customers and build an efficient network with minimal deadhead miles. That leads to more strategic relationships, more reliable capacity, improved service from consistent drivers, and, yes, lower costs as rates are locked in for a multi-year contract period.
As the driver shortage worsens and capacity gets tighter, shippers will need to adapt to more of a seller’s market. Going forward, carriers will direct available freight capacity to shippers that help them maximize drive time, asset utilization, and profits.