07 Jul Truck driver shortage, other troubles could push up prices for consumers
A shortage of truck drivers, ripple effects from an extraordinarily harsh winter, new federal trucking regulations, more items needing to be transported and higher fuel costs are why some companies are having a tough time getting their deliveries on time and at a reasonable price.
Industries as diverse as beer distributors and auto parts manufacturers are rollin’, rollin’, rollin’ into a trucking crunch — and that could mean increased prices for consumers.
With the U.S. economy turning around, the trucking pinch could get worse, experts said. As people are spending more on consumer goods, there are more raw goods and then merchandise to transport. And individuals who might otherwise drive trucks are opting for jobs in the now-rebounding construction sector.
The U.S. is home to 3.2 million truckers but needs another 30,000 drivers, the American Trucking Associations said. The shortage has been a persistent issue; it ebbed during the recent Great Recession, but has worsened steadily as the economy improves.
The median pay for a tractor-trailer trucker is $38,200, according to the U.S. Department of Labor’s most recent data from 2012.
Jim Wanty, president of O, an Ypsilanti-based beer distributor, has 35 trucks servicing a six-county area, and now his 40 truckers are working shifts as long as 12 hours. He’d like to increase his staff by 10%.
“Our business is picking up. Then we need more trucks on the road to deliver our product. The trucks get filled right to the top. … You have to make hay when the sun shines,” he said. “People are now gainfully employed again, and beer’s a recreational commodity.”
The supply-chain problem starts before it gets to him, though. “There’s a shortage of trucks of getting products to our warehouses,” Wanty said. “Then, we’re low on inventory. We either lose sales or we have to make it up at the end of the week when products come in with longer hours or Saturday deliveries.”
Last July, federal trucking so-called hours-of-service rules changed; they limited the number of hours truckers can work and allows them to restart their work clock if they sit out 34 hours, including certain hours of the night. The trucking industry says this curtails their productivity, which ultimately leads to higher trucking charges and higher prices on raw materials and items on store shelves.
Ann Arbor-based Con-way Freight has a fleet of 9,500 trucks with an estimated 15,000 drivers, but the company has 800 open positions, according to spokesman Gary Frantz. The company is planning to reopen its driving school at its Romulus service center.
“It takes more drivers to move the same amount of freight,” he added. “We’re still seeing some rebounding occur since the winter caused some shippers to hold back on their business activities. We’re seeing some of that come back in the spring. … Over the last several, a lot of capacity has come out of the business. Companies either are exiting the business or cutting back on the size of their fleets. Remember, we had a recession. Business went down, freight volumes retracted and companies reacted.”
Marty Koppelman, president of Columbia Steel and Wire, has seen freight rates jump 10%-15%. His Cleveland company manufactures steel bars and wire for the construction trade and auto and lawn mower parts suppliers, including some in metro Detroit.
He views the trucking problem as a shortage in traditional supply-and-demand terms; his company now sends out 20 truckloads of material a week, more than was the case during the heart of the recent recession. During that time, some drivers left the trucking business, making the situation today more acute.
“It’s been extremely busy, so there were not enough trucks to handle all the volume. When that happens, the truckers are very selective, so they’re only going to take the loads when they make the most money and have a round trip,” he explained. “They know they have you. They jack that price up.”
To combat the higher freight weights and truckers who don’t want to deadhead on the way home, Koppelman is considering buying his own truck — about $70,000. Until then, he has to stomach the higher costs himself and anticipates a 4% drop in profits this year due to the transportation issues.
“We have to add it to our price now,” he explained. “When we quote a job, we quote a delivered price. … Three weeks after, the steel is ready and the price has gone up. We have to swallow.”
Seventy percent of all U.S. freight by tonnage is moved by truck, an estimated 9 billion tons, the American Trucking Associations reported.
Dependability is key in logistics, according to John Taylor, chairman of Wayne State University’s department of marketing and supply-chain management.
“You can plan a system as long as you know the transportation will be on time. If you know and it’s reliable, you can plan your system around it. Big problems arise when you have lack of reliability,” he explained.
“Consumers wind up paying more, because it takes more truckers, there’s less reliability, and there needs to be more inventory in the system — and inventory costs money. That means retailers, manufacturers, wholesalers are carrying more goods in warehouses than they otherwise would, and that inventory costs money to hold.”
Not everyone is feeling the trucking pinch, among them Busch’s, Art Van and Meijer.
Others, like Sears Holdings and Kroger, declined comment.
Larry Krispin, the head buyer for the seven-store chain Hiller’s, reported that the supermarkets are getting deliveries on time, but some freight rates have gone up due to higher fuel costs.
“We are unfortunately eating the increase. Our costs have gone up,” he said. “It’s not to the point where we have to pass it along. We think we’re OK by absorbing the increases.”
Contact Zlati Meyer: 313-223-4439 or firstname.lastname@example.org. Follow her on Twitter @ZlatiMeyer