One of my favorite people in the transportation industry used an analogy recently that warmed my prog rock heart.
He said there was a steady drumbeat of people—both carriers and analysts—talking about a shortage of truck drivers as if it was an unalienable truth. That to suggest anything else would be outrageous.
In his words, he said “there aren’t a lot of Neil Pearts out there,” referring to the drummer of the prog rock band Rush and a musician generally considered to be among the best and most technically accomplished of his era.
The analogy essentially means the drumbeat behind the driver shortage is a bit unsophisticated and lacks nuance.
This person contends the driver shortage really wasn’t evident in the data in the first half of 2015. That’s not to say there isn’t indeed a looming shortage of drivers being masked by poorer than expected tonnage during that quarter. It’s just to say that shippers should not have had loads turned down for lack of drivers at this point.
I have to say, my anecdotal evidence jives with that—I’ve yet to come across a shipper who’s told me his or her cargo has gone undelivered because there wasn’t a driver available. Again, not to say that hasn’t happened—it’s just no one’s told me of such an experience.
More likely is that capacity is a bit tighter in certain lanes and under certain conditions, and that in those circumstances it takes a higher rate or a long-term relationship to get that move accomplished.
The counterpoint to that argument is the rather doomsday scenario transportation veteran and chief of relationship development at TranzAct Technologies Mike Regan painted in a conference call hosted by Stifel’s Transportation and Logistics Research Group in late June.
Regan’s presentation, which urged listeners to prepare for “predictable surprises,” surmised that trucking rates will rise 15 to 20 percent over the next few years as regulations sap the industry of trucking capacity.
Regan said shippers should, at this point, not be caught unaware by surprises that are entirely predictable.
“Once bloated inventories are drawn down, once West Coast port operations fully normalize, and once currency exchange rates and energy prices revert to the long-term mean, the capacity crisis will quickly reappear and may ultimately make 2014 look tame by comparison,” Stifel said in a summary of Regan’s talk. “Supply and demand were very tight in 2014 thanks to non-sustainable weather disruptions, non-sustainable declines in rail intermodal service quality, and rolling work slowdowns that occurred at West Coast ports. If shippers wait for the supply/demand dynamic to tighten dramatically, they will be left standing without sufficient capacity or third party support as if they are the losers in the game of musical chairs.”
Now you can choose to believe both the Neil Peart version of current trucking capacity data and the nightmarish future projections. It’s not mutually exclusive to have somewhat aligned capacity at present and a severe shortage down the road.
But the message should be this—preparation lets you take advantage of both scenarios. If a shipper believes the driver shortage drumbeat, they are probably paying above market rates for capacity in the short-term because they are ill-equipped to respond to changing dynamics in the procurement of truck capacity.
Preparing for the sky to fall doesn’t mean you’re efficiently securing capacity in the present. Similarly, counting on the factors that have loosened capacity in the first half of 2015 to continue forever won’t prepare you to deal with a shortage that is in all likelihood coming, and with a vengeance.
This commentary was published in the August 2015 issue of American Shipper.
