MIAMI -- A driver shortage, increased freight demand and new government regulations will mean drastically higher shipping costs later this year, said a speaker at last month's Food Marketing Institute Distribution Conference here.
The only effective way to deal with this challenge, which does not even take into account recent increases in fuel costs, is to reduce the amount of time drivers spend waiting at distribution facilities, said Lana R. Batts, president of the Truckload Carriers Association, Alexandria, Va. The alternative is to purchase 70% more trucks to move the same amount of freight, and hire enough drivers to run them, she said.
"I don't think anybody here has to lose in order to fix this problem," said Batts. "I believe that there is a win for everyone -- there is a win for the shippers, there is a win for the receivers, there is a win for the carriers, and there is a win for the drivers. But we are going to have to change the way that we do business."
Drivers, whether of dry-van or refrigerated trucks, spend about 34 hours a week waiting to be loaded or unloaded, according to recent studies by the association. With truck-operational costs at about $60 an hour, that translates to more than $2,000 lost per truck every week to nonproductive time, or $1.5 billion a year for the supermarket industry, said Batts. "So it is pretty easy to figure out that this boat doesn't have a leak, it has no bottom," she said.
"The just-in-time-to-wait concern is what we are all dealing with. It should not take more than two hours to load or unload a truck. In fact it should not take more than 30 minutes," she said. The average loading time is currently seven hours, she noted.
Another cost center for the trucking industry is replacing drivers, and this waiting time contributes directly to their job dissatisfaction. "For a motor carrier to replace a driver, the fully allocated cost is around $9,000," Batts said. The industry needs 80,000 new drivers every year, she said. "When unemployment is very low, people have other options than going into truck-driving. As a result, we have a high turnover ratio."
Meanwhile demand for freight is going up quickly. "In the last 10 years, the trucking industry experienced a 30% increase in freight demand. We are projecting that it will increase another 30% in the next five years," she said.
Combining all these factors with new regulations expected from the Occupational Safety and Health Administration that will limit drivers' use of forklifts and manual loading and unloading, as well as more restrictive hours of service regulations coming from the Department of Transportation, shipping costs are going to escalate dramatically, Batts said. "The government is going to take this from a chronic to an acute problem this year," she said.
"Go buy stock in Volvo and Kenilworth because we are going to have to buy 70% more equipment, hope we can find the drivers to fill them to move the same amount of freight, or we can figure out how to eliminate those hours that they spend nonproductive at the dock. That is our only choice," she said.
For carriers, increased productivity will come from "reduced waiting time at the docks, improved utilization of our equipment and a reduction in driver turnover. Drivers want to drive. They don't want to load and unload trucks. If they wanted to do that, they would have become lumpers," Batts said.
"For shippers, there are reduced shipping costs, throughput on the docks, increased safety at the docks and reduced shortage and damage," she said. Receivers will minimize out of stocks, she noted.
"We have no choice other than changing the way we do business, unless you want to end up seeing 70% more trucks on the road that you paid for in order to move the same amount of freight," she said. That will result from the new hours of service regulations. "You can lobby Congress all you want, you can lobby DOT all you want, but based on my 25 years in Washington, I think those rules are in concrete and they are not going to change," Batts said.