Submitted by Vinay Cardwell on 12/20/2019
When you order something online, you know that it shows up onto your doorstep in 2-5 days. But how does it get there and who delivers it? Most people think that it arrives from a warehouse back East and is flown in on a plane and shows up. What most people don’t know is that the vast majority of products are transported by truck. Air, with all of its efficiencies and rapid delivery, is far too expensive. When someone wants it overnight, it arrives on a truck. Even the company Forward Air ships on a truck. How ironic?
I have been in Supply Chain and Logistics the vast majority of my professional career. I graduated with my undergrad in International Studies and went to work for the largest North American Freight Forwarder. I saw how products were sourced, manufactured, and how the 40ft container standardized the mode of transport we have today. I have worked for a domestic manufacturer and had to organize transport and supply chains to keep production running and customers satisfied.
I have even worked for North America’s largest freight broker and have had to arrange and organize freight lanes and negotiated rates. I am currently working on a fulfillment pilot for one of the globe’s largest e-commerce platforms and know the challenges of having a product arrive at your doorstep in 2 days or less. My class next semester will be on the efficiencies of the Supply Chain and shipping. I am experienced and know the intricacies of Supply Chains. The one thing that no one is talking about and the backbone of the economy is the trucking industry.
Trucking runs our economy. If you don’t believe me wait for the next blizzard or hurricane to come through and see what happens. Trucking handles about 70% of the tonnage shipped across our country. With the emergence of the Federal-Aid Highway Act of 1956 the country has been able to be connected through paved road and highways and has enabled interstate commerce to thrive. It’s provided those with just a CDL and 21 years of age to be their own boss, and grow their own fleet of trucks. The Highway system and the ability to jump in a truck and leave at any time and drive made the logistics and supply chains in America expand.
For decades this has allowed for drivers a tempting field to get into. But things have now changed. According to the Bureau of Labor Statistics, the average age of a driver is 55, and the typical lifestyle and lifespan are challenging due to the vices and sedentary days of driving on the road. They are away from family and homes and are constantly being yelled at. Government restrictions have put a cap on your hours of driving before a required rest or break. Now you are electronically monitored through ELD’s (Electronic logging device). This puts a limit on the ability to take hauls and caps the hours you can drive. These negative externalities or unintended consequences are pushing drivers out or into other fields of work.
Where is the workforce going? The substitute industries where a person can work in that does not take them away from their homes and families, although they may still get yelled at. Construction is on the rise and pays just as well, if not more than trucking. Manufacturing is still steady in America and can provide the benefits and retirement planning that people want and need as well as advancements within the companies.
E-Commerce is on the rise and warehousing, and Supply Chains are growing more in metropolitan areas keeping people close to home and their weekends free for their leisure. All of these are substitutes to what truckers can do, but something else that is a significant contributor is the extremely low unemployment rate. The supply side of labor can practically pick and choose the routes they would like to go in because demand for those roles and rates are there. For these reasons and the increased demand for shipping services, the trucking industry is needing to grow.
What happens if the industry doesn’t grow its workforce? Rates and costs for shipping will rise. Amazon has already implemented this process in raising Prime rates by 20%. Major carriers are now upping their driver rates to entice drivers to either switch carrier companies or to try and get them into the industry. According to the ATA or American Trucking Assoc. the outreach to female recruits has been low as they only account for 6% of the drivers on the road and the language barrier of Spanish and English is a challenge because the Hispanic drivers are the other demographic to bring on. These two demographics will need to be enticed if the industry is to evolve. There are 31 million drivers currently with CDL licenses and to keep up over the next decade we will need to replace about 900,000.
What are the alternatives if we can’t replace the drivers? 1) We accept that rates will go up regardless. 2) Congress will have to step in and deregulate and stimulate the industry. 3) Autonomous vehicles. Costs will go up. This is already happening and will continue to occur as the backflow of drivers is not being replaced. We are just going to have to accept that this is the new norm. Congress will need to stimulate the industry with tax incentives on tonnage hauled, reduce the ELD requirements, and provide a subsidy to the truckers to drive.
The last alternative that can become the most disruptive and companies are racing to will be autonomous vehicles. Here in Salt Lake City we recently allowed for an Inland Port to help clear customs and get products into the country faster than at the Unioned and bottlenecked ports. The city is building a depot outside of the city just off the highway to allow for trucks inbound from the ports to drop off into a truck yard and be taken to a rail line to go further into the country or sent to Distribution Centers where a company now has to rely on the final mile delivery. The long haul is the most straightforward piece of transport while the final mile will have the most challenging and strategic part. Final Mile will be more inviting to drivers to stay local than the long haul part.
Trucks, labor force, and technology are all a part of the Supply Chain that we see being used every day. We may take for granted that our products are going to show up at our doorsteps but we are going to take notice when they will begin to start arriving later, and the rates start to go up. But the unfortunate thing will be that it may be too late to change the old way of doing business and disruptive technology will come in and take over the industry. Then we are going to have to displace more than just truck drivers.
Submitted by Vinay Cardwell on 12/20/2019