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Focus: Transportation Management

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From SCDigest's On-Target E-Magazine

Sept. 19, 2012

Logistics News: Truckload Driver Turnover Exceeds 100,000 for First Time in Four Years, Fanning Fears Over Looming Driver Shortage

Is the Big Crunch Really Coming Soon?

SCDigest Editorial Staff

The American Trucking Associations quarterly analysis of truck driver turnover was released last week, and showed the metric among large truckload carriers (those with revenues over $30 million) exceeded the 100% level for the first time in more than four years.

SCDigest Says:

In their second quarter earnings calls, a number of large public truckload carriers sounded warnings on the growing shortage of drivers - as they have been doing for a number of consecutive quarters..

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AThe turnover rate in TL of 106% was the highest level since the fourth quarter of 2007, and the first time the metric has been over 100% since the first quarter of 2008. The measure was 88% in Q1, and as low as just 50% in Q3 of 2010.

The news isn't as bad as some media outlets have been reporting, in which it was noted that this is the equivalent of a carrier turning over its entire driver pool in a single year.

The reality is that the vast majority of the turnover comes from new hires who decide they don't want to drive a truck for a living. When the failure rate of those new drivers is high, it can send the overall turnover rate soaring even if most long term drivers remain on the job.

The news is nonetheless worrisome given many recent predictions that the US trucking industry could face a huge driver shortage over the next two to three years, playing havoc with capacity and rates in the industry.

As recently as 2010, there was a driver surplus is the US, although a small one, as shown in the chart below from FTR Associates.

Now, there is a shortage of some 100,000 drivers, with the likely potential that the shortage will reach 250,000 by the end of 2014. That would put the shortage at about the same levels seen in 2005, when there were substantial capacity issues in the industry.

In their second quarter earnings calls, a number of large public truckload carriers sounded warnings on the growing shortage of drivers - as they have been doing for a number of consecutive quarters.

US Driver Shortage Expected to Become Severe

Source: FTR Associates

(Transportation Management Article Continued Below)

CATEGORY SPONSOR: SOFTEON

For example, Swift said it fell short of its goal to modestly increase its truck count "due to increased pressure on recruiting and retaining drivers." In other words, it didn't acquire trucks for which it couldn't find drivers to fill. (See Truckload Carriers Once Again Post Generally Solid Q2 Results, as Asset Discipline Continues to Pay Off)

What's going on? A number of factors. In terms of turnover, the lack of interest in driver jobs by younger workers is likely one key factor, as "Gen Xers and Yers simply don't want to drive a truck for a living," noted John Larkin, respected transportation industry analysis for Stifel Nicolaus, on a recent videocast.

That means fewer younger workers even consider a driver position, and those that do often quickly decide that idea was a mistake and leave the job.

It is worth noting that in the less-than-truckload (LTL) sector, in which drivers travel much less far and are usually back home each night, the Q2 turnover was just 9% in Q2, up just slightly from the 9% seen in Q1, but obviously just a small fraction of the turnover seen at truckload carriers.

In general, the ATA and others have observed that historically there has been an ebb and flow between the construction industry and trucking. At periods when construction jobs decline, workers move into trucking, later leaving as construction jobs come back. Now, however, even as construction jobs remain low, workers are not migrating back into driving.

The Compliance, Safety and Accountability (CSA) 2010 requirements, which require carriers to report the safety records of their drivers in more detail, is and will continue to have an impact, as drivers with even small blemishes on their records can be drummed out of the ranks for insurance reasons or to avoid a carrier losing business from shippers looking at the CSA data in making decisions about who will move their freight.

New Hours of Service rules set to go in effect in July of 2013 will likely exacerbate the driver shortage, as driver productivity will be reduced by as much as 9%, according to some estimates, meaning more drivers will be needed to carry the same level of freight.

In the end, shippers will be taking on the budget chin under almost any scenario. Either the severe driver shortage will be realized, leading to very tight capacity and rising rates, or the carriers will increase wages enough to reduce the shortage (with increases needed of as much as 20-30%, according to estimates by a number of carrier CEOs), which - surprise - will also lead to higher rates as those costs are passed on.

Are you worried about a looming driver shortage, or is the hand wringing overblown? Let us know your thoughts at the Feedback section below.

Recent Feedback

I'm not at all surprise by the shortage of drivers. Who wants to work 14 hour days, with minimum pay wages and total lack of appreciation? I was one of those driver's who believed in the love of the open road. After only a few months, the lure of the big rig industry has disappeared after working for one of the trucking leaders. I worked almost every week for up to 70 hours and was promptly called during my 34 hr reset to report back to work at the 35th hour. It was a never ending drumbeat of abuse. Thank President Obama for the new restrictions next year regarding the reset that must include two 1am-5am off duty periods in your 34-hr reset. The only real way to fix this industry is to pay driver's an hourly wage with only regional loads.

Ed Smith
OTR Driver
Schneider National
Sep, 19 2012

So with this shortage, would it not be a good thing for our jobless to get trained and get a job or is it that because they wouldn't have any experience, which might be hard to get?

We don't need younger guys, just get our unemployed some training and back to work...why not?

Franco Tandoi
Director of Inbound Logistics
Distribution
Sep, 27 2012

Truck load rates have been traditionally low compared to Europe. Cost of gas has a lot to do with it, of course, but also more restrictions on limitations in terms of hours and breaks affect this as well. 2013 looks really scary, with gas not coming down anytime soon and more restrictive labor conditions and shortage of drivers.

Juan
Materials Handling Division
www.schaefershelving.com
Oct, 03 2012

The shortage is due to driver turnover of more than 100% and what type of drivers are leaving. A carrier with 4,000 drivers will hire 4,000 drivers. The issue is most likely 3,000 drivers stay on the job. Of the new hires, 1,000 drivers will quit after an average of 3 months, so 4,000 drivers have to be hired during the full year for these 1,000 positions.

Train the unemployed? Many of these new hires had their training paid by government funding. They are the ones most likely to quit because they have nothing invested.

The two main reasons drivers leave is low pay and long periods away from home.

It has been alleged carriers aren't bothered by high turnover. Trainee drivers are often getting paid $300 a week and drive as much as 3,000 miles a week as team drivers. Often the "trainer" is asleep while the trainee drives. A high turnover of new hires means a constant supply of cheap team drivers.

Richard Gaskill
Regional driver
Quality Carriers
Mar, 20 2013