Executive Briefings

Preparing for the Impending Driver Shortage

The truck driver shortages of 1983 and 2004 could be dwarfed by what's coming by 2012, in the view of Tom Nightingale, chief marketing officer at Con-way. New hours-of-service rules and CSA 2010 are doing nothing to help that situation. Still, there are ways to prepare for the crunch.

If in fact the economy is coming back, it will soak up the extra capacity that the industry had during the recession. That's a good problem, Nightingale says, but there are consequences to having smaller fleets.

"There are 142,000 fewer drivers now than in 2007," he says. "Take that and layer on top certain government regulations, and there will be a dampening effect on capacity. One [regulation] is the hours-of-service requirement. Its effect is a bit nebulous, but it will shrink down capacity again by limiting the hours drivers can work. Two is much more certain. CSA 2010 can take as much as 5 percent of truckload capacity out of the marketplace."

Couple all of this with banks being stingier with financing and the net is: "We could see a loss of of 400,000 drivers by 2012.  We were only at 130,00 in the crisis of 2004. And we saw that freight was abandoned on docks then. This is a problem that's looming and of far greater magnitude than that one was."

If anything, the coming problem is more akin to the shortage of 1983, Nightingale says, when the number of drivers fell by almost 200,000.

So how does a shipper prepare? Among other things, they need to negotiate fair contracts with providers now. Nightingale says that customers that were willing to keep carriers busy at a fair rate in 2004 were much more likely to get service than those who tried to lowball their providers.

In addition, shippers should avoid causing unproductive detention and demurrage. Drivers want to keep rolling, and shippers should be sensitive to that.

The reality, however, is that pricing power will shift from the shipper to the carrier in the new environment.

To view this video interview in its entirety, click here.

If in fact the economy is coming back, it will soak up the extra capacity that the industry had during the recession. That's a good problem, Nightingale says, but there are consequences to having smaller fleets.

"There are 142,000 fewer drivers now than in 2007," he says. "Take that and layer on top certain government regulations, and there will be a dampening effect on capacity. One [regulation] is the hours-of-service requirement. Its effect is a bit nebulous, but it will shrink down capacity again by limiting the hours drivers can work. Two is much more certain. CSA 2010 can take as much as 5 percent of truckload capacity out of the marketplace."

Couple all of this with banks being stingier with financing and the net is: "We could see a loss of of 400,000 drivers by 2012.  We were only at 130,00 in the crisis of 2004. And we saw that freight was abandoned on docks then. This is a problem that's looming and of far greater magnitude than that one was."

If anything, the coming problem is more akin to the shortage of 1983, Nightingale says, when the number of drivers fell by almost 200,000.

So how does a shipper prepare? Among other things, they need to negotiate fair contracts with providers now. Nightingale says that customers that were willing to keep carriers busy at a fair rate in 2004 were much more likely to get service than those who tried to lowball their providers.

In addition, shippers should avoid causing unproductive detention and demurrage. Drivers want to keep rolling, and shippers should be sensitive to that.

The reality, however, is that pricing power will shift from the shipper to the carrier in the new environment.

To view this video interview in its entirety, click here.