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Fewer Hours, Fewer Drivers: What's a Trucker to Do?

Trucking companies say they're feeling the pinch from the new Hours of Service (HOS) restrictions imposed on them earlier this year. But the industry was already suffering from an acute driver shortage before it shouldered that additional burden.

Fewer Hours, Fewer Drivers: What’s a Trucker to Do?

Mandated by the Department of Transportation’s Federal Motor Carrier Safety Administration, the current version of the HOS rule took effect on July 1. It caps a truck driver’s maximum average workweek at 70 hours. In addition, drivers are limited to 11 hours on the road in a 14-hour workday, and are required to be off-duty for 10 consecutive hours. They must also take a 30-minute break during the first eight hours of a shift.

Truckers say the rule has bit into their profitability. Schneider National has reported a 3.1-percent drop in productivity on solo shipments since implementation, and a 4.3-percent decline on team hauls. Other major truckload carriers, including J.B. Hunt Transport Services, Inc., Werner Enterprises Inc., Swift Transportation Co. and Knight Transportation Inc., have claimed productivity declines of 2 and 3 percent.

FMCSA defended the rule at the time it took effect, claiming that “only the most extreme schedules where drivers are working more than 70 hours in one week will be impacted. The vast majority of the truck-driving workforce – more than 85 percent – will see little to no change in their schedules as a result of the rule.”

More recently, the agency reaffirmed its commitment to highway safety, stressing that the HOS rule addresses the problem of accidents caused by driver fatigue. It claimed the rule will prevent approximately 1,400 crashes and 560 injuries, and save 19 lives, each year. Over the long term, FMCSA said, that translates into $280m in savings from fewer crashes, and $470m from improved driver health. (That’s code for “fewer deaths.”)

The agency’s words are of little comfort to many drivers today, whose livelihood is being challenged by a slew of new regulations on work rules and environmental standards. But the biggest problem facing the industry today is one with which it’s been grappling for years: the chronic driver shortage.

Said Armutcuoglu, managing director of Loeb Partners Corp., quotes an estimate by FTR Associates that the industry-wide trucker shortage will nearly triple, from 113,000 to 323,000, by 2015. The HOS rule is a factor in that trend, but he believes the larger reason is the reluctance of younger people to enter the business, coupled with the mass retirement of Baby Boomers. Newcomers don’t want to be on the road for days at a time, or deal with the many regulatory headaches, and can usually find more lucrative employment elsewhere.

“If people think there’s a shortage now, you’re going to see a totally different landscape [in the next 24 months],” agrees Robby Nathan, chief executive officer of Load Delivered Logistics LLC. “You cannot train drivers fast enough now.”

There’s a contrary view that the driver shortage is a myth. The real problem, the argument goes, is that trucking companies are simply refusing to pay high enough wages to attract what amounts to a huge pool of potential talent. Many former drivers would be back in the cab today, if only they were fairly compensated.

That argument has merit, but it doesn’t really conflict with industry’s claim of a widespread worker shortage. The bone of contention is the reason for this state of affairs. And the solution isn’t as simple as it might seem – at least for the moment.

According to Armutcuoglu, trucking margins are under severe pressure today. Intermodal service, with its promise of sharply lower rates for longer distances, is becoming increasingly attractive to shippers. As I reported in my previous post, intermodal saw a 9.4-percent bump in domestic-container volumes in the third quarter of this year – business that would otherwise have gone over the road.

“Longhaul intermodal is eating into the market share of truckers,” says Armutcuoglu. “More and more, intermodal is going to be the choice of ultra-long distances.” And with the railroads finally getting their act together on service reliability, the intermodal option is becoming more attractive for certain shorter hauls as well.

At the same time, Armutcuoglu says, there’s a glut of trucks on the road today. It doesn’t cost that much to start a small trucking business, he notes – less than $20,000 up front for a vehicle, plus $12,000 or so for insurance and a couple thousand dollars for the first tank of gas. As a result, thousands of mom-and-pop operations have sprung up around the country, driving down prices and margins. Now throw in the recovering construction business, which tends to draw from the same labor pool as the trucking industry, and you have a situation of too many trucks and not enough drivers.

For the moment, many struggling carriers can’t afford to pay higher wages to their drivers. They’ll eventually go out of business, and classic economics will begin to assert itself. With fewer operators on the road, the survivors should be able to pay their drivers more, and pass along at least part of the increase to customers.

The job of operating a truck will likely gain favor as regional players come to focus on shorter hauls. That means fewer nights on the road for truckers, who can partake of a more stable (and more lucrative) lifestyle.

So will we really reach that staggering number of 323,000 driving positions going begging by 2015? The state of the economy will determine how quickly sanity regains its hold on the industry. Meanwhile, investors continue to flock to the handful of big trucking companies that are managing to employ reliable drivers, stay current with technology, operate efficiently and keep track of a mass of regulatory filings.

“The general view,” says Armutcuoglu, “is that if the economy is improving, some leaders in the transport sector are going to do very well.” The question is: How long are they willing to wait for all that road dust to settle?

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Keywords: supply chain, supply chain management, supply chain planning, transportation services, driver shortage, Hours of Service rule, supply chain jobs

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