The chronic shortage of drivers is now affecting all segments of the trucking industry, from drayage to regional and long-haul operations, and shows no signs of abating near term – spawning a range of efforts to attract and keep workers willing to pilot commercial vehicles for a living.
“Tight over the road [OTR] capacity due to the driver shortage is certainly contributing to the growth of domestic and international intermodal,” noted Joni Casey, president and CEO of the Intermodal Association of North America (IANA), in a conference call hosted by Wall Street investment firm Stifel Nicolaus & Co. last week.
“However, the driver shortage is hitting the intermodal segment as well,” she said. “Trucks are a key component of every mode, from ocean shipping and rail to air cargo, because trucks handle the first and last mile.”
Still, intermodal traffic continues to grow in part because drivers are in shortest supply in the OTR segment, Casey stressed.
“Shorter lengths of haul are a positive factor” for driver retention, she noted, pointing out that hours of service (HOS) changes made several years ago have cut OTR productivity anywhere from 2% to 4%, based on industry data.
IANA’s data indicates intermodal traffic increased nearly 5% year-over-year in 2014 compared to 2013 and expanded 2% in the first quarter this year despite disruptions caused by severe winter weather across much of the U.S.
John Larkin, managing director & head of transportation capital markets research for Stifel, noted in follow-on written comments that intermodal “clearly is taking share within the containerizable freight market” often with the blessing of “bi-modal carriers” such as J.B. Hunt Transportation services, Swift Transportation, and Knight Transportation, which have forged collaborative relationships with the railroads.
“Simply put, the trucking-based companies want to shift as much freight as possible to the rails in order to preserve capital intensive tractors and scarce compliant drivers for those lanes not well served by rail-based intermodal services,” Larkin noted.
Near term, though, he said supply and demand where truck capacity is concerned remains “still relatively tight, just not as tight as experienced in 2014,” as the U.S. enters what he called a period of “normal supply chain fluidity.”
“All in all, supply and demand is now more in balance than at this time last year,” he noted. “As a result the spot market has cooled and contract price increases have been slightly harder to come by. One [Midwest TL] carrier executive told us he was getting 10% rate hikes last year, whereas this year the increases are likely to be half that.”
Larkin pointed out that carriers are “bending over backwards” to give drivers a large portion of those rate increases, though the Midwest-based TL carriers Stifel recently interviewed believe higher driver pay alone will not solve the ongoing shortage.
Thus a broader array of driver-focused retention efforts are being more widely deployed by motor carriers, he noted, including:
- Getting drivers home more frequently and more regularly;
- Buying trucks outfitted with the latest driver friendly amenities;
- Reducing the driver to fleet manager ratio in order to increase driver/fleet manager communication;
- Building driver-friendly lounges, cafeterias, exercise rooms, and bunk houses at or near terminals;
- Proving health improvement programs;
- Building or developing more driver training schools.
“Still, the driver recruiting and retention issue remains the number one challenge facing the industry today,” Larkin emphasized.