Worried About the Driver Shortage? Here’s What You Should Know.

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Have you ever tried filling a bucket with water when there is a hole in the bottom?  No matter how much water you pour into the bucket, it will continue to drain until you plug the hole. The logistics industry faces a similar situation on a regular basis.  However, rather than water, the trucking world is struggling to keep the bucket full of a different resource: drivers. The current turnover rate for truck drivers is about 95 percent, and driver shortages are affecting supply chains across the country.

A report from the American Trucking Association revealed that over 70 percent of the goods consumed in the U.S. are moved around by trucks. To effectively meet this demand, the trucking industry needs to hire about 900,000 more drivers. No big deal, right?

Carriers are pulling out the stops to raise pay and intensify recruiting to keep pace with rising freight volumes. Despite these efforts, fewer drivers are entering the workforce than ever before. On top of that, existing drivers are hopping between companies to chase better opportunities or leaving the profession altogether.

Additionally, truck drivers are an aging group. According to estimates from the Bureau of Labor Statistics, the average age of commercial drivers is 55. The profession doesn’t seem to appeal to Millennial workers, which could be a major problem in the coming decades. Increased pay might be enough to tempt these young adults to explore trucking, but an investor report from Stifel Financial Corp. indicates that pay would need to increase by at least 50 percent to make a meaningful difference.

“Anything less is just playing the churn game,” the report concludes.

Ultimately, the high turnover rate is part of a larger issue that directly affects shippers. The ongoing driver shortage has created a capacity crunch in the logistics industry, complicating shipping operations and raising prices.

 

Shipping in an Age of Capacity Crunch

Most retailers are elated to be working in a booming economy, but more demand for products translates to more demand for shipping. Considering the lack of drivers, the supply of trucks can’t keep up with the demand of loads that need to be moved. This capacity crunch has severe repercussions.

Shippers must consider how this changes their shipping expenses, as well as new operations challenges that might arise. The capacity crunch will likely affect your business in the following ways:

  1. Spot Rates

The spot market for truckload transportation is highly reactive to any changes in supply and demand. When carriers know their capacity is in demand, they can increase pricing quickly. Industry statistics show that spot pricing is as much as 30 percent higher than one year ago.

  1. Contract Rates

Although they are not as quick to react as spot rates, contract carrier pricing increases more significantly when driver capacity is pinched. Carriers are paying more in driver wages and signing bonuses — not to mention losing money in turnover costs. Carriers naturally want to recover these costs when contract pricing is renewed. Even before renewal time, carriers will reduce their load tender acceptance compliance to allocate capacity to better-paying freight.

  1. Pickup or Delivery Failures

Carriers typically commit to load tenders even though they might not know which driver will be handling the load. When there’s a shortage, there’s a much greater chance that no driver will be available in time to meet service requirements. Carriers can respond by either handling the load and causing a service failure or declining the load after they’ve accepted it, which also typically causes a service failure.

  1. Poor Carrier Quality

Even if a shipment arrives on time, high levels of driver turnover often lead to poor customer experiences. Drivers who are unfamiliar with a shipper might not follow procedures or might not be prepared to handle the shipment as expected. Driver familiarity with the freight and facilities fosters high quality (and vice versa).

  1. Carriers Playing Favorites

In this setting, customers might have to compete for carrier capacity in a number of ways. They must efficiently load trucks, provide adequate driver facilities, and be flexible so they don’t detain drivers longer than necessary. Shippers who fail to provide a good experience for drivers will have a more difficult time acquiring capacity during times of scarcity, as drivers will gravitate toward their favorite customers.

 

Finding Solutions

The best way for shippers to tackle these issues is by choosing reliable carriers. A third-party logistics (3PL) provider that knows the market can help you find the best carrier for your business and the ideal balance between saving money and maximizing efficiency. However, don’t partner with just any 3PL.

Make sure the firm has a solid grasp of your business model right off the bat. It should understand and share your values and be knowledgeable about your industry and its challenges. Any trustworthy firm is also transparent about its rates, including initial and continuing fees.

Dismiss any company that tries to be subtle and “hands off.” Results only come from direct involvement in your operations, including learning everything possible about your supply chain. A 3PL cannot improve something it knows nothing about.

The shipping industry is likely to continue growing in complexity and uncertainty, and you want a partner you can trust. Whatever the coming years bring, a high-quality 3PL can help shippers navigate current and future challenges to improve operations and reach ambitious objectives.

 

If you’d like to learn more about how the ongoing capacity crunch might affect your business — and troubleshoot solutions to any problems — contact the Sheer team today.

Navigating the Increasingly Tangled Web of Supply Chain Laws

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Compliance is a challenge in many industries, but it becomes particularly important — and more complex — when your company transports goods across state lines. Shippers that don’t prioritize compliance can discover too late that they’ve been breaking the law.

Whether it’s regulations on hazardous materials or guidelines on refrigerating perishables, the patchwork of state laws can quickly complicate even the most straightforward supply chain. For example, Michigan’s prominent agriculture industry means the state allows a maximum vehicle and freight collective weight considerably higher than its bordering states. While your gross vehicle weight can legally exceed 80,000 pounds on most Michigan roads, you cannot cross into Indiana or Ohio due to the lower maximum weight restrictions in those states.

Other laws that can be troublesome relate to load size, including restrictions regarding maximum trailer length and maximum payload. Certain states have more nuanced standards, with California posing unique challenges for logistics professionals. The Golden State historically is a lot stricter regarding emissions and agricultural inspections, though newer equipment is designed with these emissions standards in mind.

When shippers need to go one step further and deliver goods internationally to Canada or Mexico, requirements increase exponentially. Between customer paperwork, taxes, and border crossings, the various considerations can create significant delays. While this hodgepodge of regulations can feel overwhelming, a little knowledge goes a long way.

A Slow Push Toward Standardization

Despite these complications, the logistics world is slowly moving toward more nationwide standardization. Aside from a few outliers, most states are aligned regarding equipment size, gross weight, and emissions restrictions.

On the federal level, government regulations dictate legal driving hours — and electronic logging devices (ELDs) to ensure those guidelines are met — for anyone operating via a commercial driver’s license in the U.S. These devices are designed to automatically track driving time to provide more accurate hours of service for truck drivers.

The next big change coming down the pipeline is the Food Safety Modernization Act (FSMA), which aims to standardize food chain operations. As a response to outbreaks of listeria and salmonella caused by unsanitary freight transportation, the Food and Drug Administration has been empowered to enforce regulations designed to increase safety.

Large companies have already been affected by the FSMA, but the compliance deadline for small carriers that make up the majority of trucks on the road won’t take effect until September 17. Food safety is indeed crucial, but the FSMA presents a steep challenge for smaller companies with more limited resources. But a tech-focused approach can help companies of any size implement these changes smoothly.

There will always be some growing pains tied to massive shifts of this sort, but standardization ends up being a net gain for the shipping industry. While some rules are still in flux, there are a number of key regulations that should always be top of mind.

As mentioned before, ELD mandates are forcing carrier compliance as it relates to driving regulations. This will continue to affect shippers — particularly for 400- or 500-mile trips that once were considered same-day shipments.

Hours of service (i.e., legal driving time) is a law that affects customers and carriers equally. Only 11 hours of consecutive driving is permitted within a 14-hour “on duty” period, after which drivers must take a mandatory break of 10 hours. While shippers might be aware of these regulations, they often overlook that a driver’s wait time during loading and unloading is considered “on duty” time.

These regulations might seem like a lot to keep in mind as you attempt to move products from point A to point B, but it’s important to remember that they’re in place to ensure the safety of drivers and everyone else on the road.

How an Outside Partner Can Lend a Hand

Whether you’re trying to move goods between states or countries, you’re going to grapple with a complex web of regulations. It takes intricate knowledge of this web to develop a shipping strategy that is both efficient and realistic.

A dedicated third-party logistics (3PL) firm should be familiar with numerous rules and regulations, including anything that varies by location. When a reliable 3PL engages with your freight program, it will typically complete the following steps:

  1. Define freight requirements.This includes determining the type of trailer, special shipping needs, and shipping and receiving hours of all participating facilities.
  2. Define transit times and routing of shipments.This involves securing carriers to complete each shipment. Carriers are qualified by geographical service area, special service offerings, and certifications (e.g., hazardous material endorsement, team driver service, etc.). The 3PL should match carriers that meet all state-specific and federal regulations with your particular freight.
  3. Execute freight shipments.At this point, the 3PL will monitor shipments, track progress, manage exceptions, and measure and report performance metrics and carrier compliance to shipping rules. While facilitating a customer’s freight program, a 3PL must tackle tricky situations such as working with multiple shipping locations or outside vendors.

Getting all parties fully engaged is one of the biggest obstacles at the outset of any partnership. A qualified 3PL should boast an implementation team of experts who can address these challenges and help set a positive tone for customers and other relevant participants. If you’re interested in partnering with a 3PL that can guarantee this level of service, contact the Sheer team today.

Inside the 3PL Process: What to Know Before You Sign

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Regardless of how tempting it might seem, the fastest and cheapest route is not always the right choice.

Think about the last time you bought a nice outfit. Snagging a suit off the discount rack at a department store will save you a few bucks today, but it’s not likely to impress anyone at your next job interview. You could also invest some extra money now to get a custom-made garment from a local tailor, ending up with an outfit that makes you look like a million bucks. Five years down the road, which suit do you think will still be in your wardrobe?

In other words, inexpensive fixes can come back to haunt you. A tailored option will be your new best friend, and a one-size-fits-all solution will not likely stand the test of time. Finding an ideal third-party logistics (3PL) partner requires the same sort of careful consideration and pragmatism as buying a treasured article of clothing.

Although most companies understand they need to look beyond price when it comes to shipping — “cheaper” often hinders scalability and affects consumer confidence — they are not always sure how to find a provider that will deliver superior results. A true logistics partner will understand your business, create a customized service for your shipping needs, and provide complete transparency in terms of where your money is going.

The Importance of Reading the Fine Print

If you need outsourced 3PL services, don’t instinctively put all your eggs in an off-the-shelf basket. Before you sign on the dotted line, spend some time reading the fine print to ensure you choose a partner that can design a strategy based on your operations, budget, and objectives. These four steps will get you started:

  1. Focus on providers that understand your business.

    One of the quickest ways to narrow your initial list of potential 3PL providers is to figure out which ones have worked in your industry before. Unless you operate in a completely unique and emerging business segment, you will likely be able to find firms accustomed to working in your sector. This foundational knowledge will decrease the amount of time 3PLs require to understand how to best serve you and your customers. Contact references in your industry to ensure other companies have had satisfactory experiences with your preferred candidates.

  2. Prioritize accountability and transparency.

    Any vendor should be turning a profit for its services, but you want a partner that offers complete transparency in terms of where your money is going. A credible 3PL firm will be transparent about its rates, aligning compensation with value shared by both parties.If a 3PL is reluctant to provide honest answers about its upfront and continuing costs, you should look elsewhere. Considering that about 90 percent of Fortune 500 corporations in America use 3PL providers, there are plenty of genuine companies out there that will be willing to stand behind their service.

  3. Expect plenty of close interaction.

    Does one of your top candidates claim it will not need much of your time? Consider that a major red flag. Any worthwhile 3PL partner will want to have multiple conversations with you and your team members from day one.Your internal teams will have a variable level of engagement with your logistics partner over time, but everyone should be highly engaged and working in tandem during the implementation phase, which can last up to three months. Be suspicious of firms that promise to have you up and running with minimal effort in a matter of weeks. If potential providers don’t prioritize communication and collaboration early in the relationship, that is not likely to change months or years down the road.

  4. Be prepared to share information.

    You might feel hesitant discussing proprietary information with outsiders, but it’s absolutely necessary to let any 3PL you are considering know everything you can about your current supply chain. These conversations should cover everything from shipment volume to delivery locations to transit times. The more information you are able to provide, the easier it is for potential partners to evaluate your current situation and propose a customized solution to resolve any issues.

Finding a 3PL partner is not a simple process, but the time you put in at the outset will more than pay for itself later. Once you have developed a short list of potential providers, issue an RFP to ensure everyone bids from the same starting place.

Dedicate ample time to reviewing proposals and performing due diligence. Meet with top candidates face to face, tour their offices, and get to know their teams. After a thorough evaluation process, you will be free to sign a contract knowing you have made the best decision for your company and the customers you serve.

Want to figure out whether Sheer could be a great 3PL partner for your company? Contact us today to develop a plan for your business based on our extensive logistics expertise.