For some struggling fleets, re-engineering a fleet’s entire operation might be what’s needed to avoid a worst case scenario.
The headlines in the trucking trades seem contradictory, with some confirming that trucking capacity is indeed tight right now, while others report a doubling of fleet failures. With shippers scrambling to find trucks to move their freight and rates potentially rising 4-6 percent this year, how is this happening?
The short answer is increased regulatory demands and the costs they generate, as well as driver-related costs. These pressures are hitting under-capitalized fleets particularly hard. They have been struggling with implementing electronic logging devices, the hours of service rule change, and the maintenance costs resulting from utilizing older trucks.
For these fleets still feeling the effects of the decreased freight demand and lower pricing prior to the current upturn, the positive changes we’re now seeing are just coming too late.
According to Avondale Partners’ David Broughton, the biggest factor in the failure rates is the impact of driver-related costs. These include the rising pay rates and the very expensive process of recruiting and retaining drivers. At nearly a 100 percent turnover rate, truckload carriers are replacing the equivalent of their entire driver pool each year to meet current capacity (not to mention the need for expanded driver pools as shipment levels increase in the years ahead). And with the average cost of recruiting a driver costing $5,000, well, you can do the math.
The impact of regulations, specifically the implementation of electronic logging devices, has been tough on fleets about to exit the industry. Those fleets which have been requiring drivers to use the devices are finding that the fleets are generating fewer miles, which is spurring drivers to leave because they aren’t getting the miles they want. According to Broughton, this leads to unseated trucks, a rise in driver’s pay, and an increase in cost per mile. It’s a very negative cycle and one hard to break.
As one solution, he suggested that carriers re-engineer their system to recover lost miles. We suggest a route optimization analysis be conducted on a regular basis, working with weekly or monthly statistics covering current routes, pickup and delivery orders, and distance and time traveled. By working with the latest robust modeling technology, the logistics consultant can recommend not only better ways to get the most out of drivers and equipment, but also a way current drivers can regain some of those lost miles as freight levels continue to grow.
We’d love to hear your thoughts. What other solutions would you recommend?