What caused the driver shortage? What made it worse? What steps can we take to alleviate it? And what lessons can we draw from the crisis? We get answers from Antonio Galvao, chief supply chain officer with DuBois.
Q: By all accounts, we are in a very critical driver shortage situation right now. And we have new regulatory requirements that are making it even worse. Did you see this coming?
Galvao: Every logistician had the hint that something bad was going to happen in the marketplace. We had an aging driver workforce with high turnover. There was also an increase in regulatory demands and constraints, with stricter hours of service and mandatory ELDs [electronic logging devices]. This was announced in 2015, which told logisticians that something would happen as soon as the economy started growing again. We got to a point where we reached the perfect storm, with demand increasing and capacity becoming constrained.
Q: What could have been done to get ready for this?
Galvao: Most companies were thinking about being attractive to carriers — how they could be considered a shipper of choice. You could be promoting a good work environment, or maintaining a good facility for drivers. We’re at the point that carriers have the power to choose which customers they want to serve, so if you have a good waiting area and you offer coffee and good bathrooms for the drivers to get into, it's a big step forward.
Another thing you need to do is understand your operation. To carriers, the biggest offense today is not being quick in unloading and loading their trucks. Detention is a big issue. Carriers aren’t willing to stay at your facility for more time than necessary, so you need to make sure that you have an efficient operation, and are maintaining a good environment. You need to be easy to do business with, if you want to be considered a shipper of choice.
Q: But isn’t a lot of this outside of our control — the fact that the Baby Boomers are retiring, and not being replaced in the same numbers by the next generation?
Galvao: That's absolutely true. Right now, the estimated deficit of drivers in the marketplace is around 60,000, and that’s going to increase in the coming years.
Q: How can technology help?
Galvao: You need to make sure that your packaging is maximizing density, and that you’re optimizing truck utilization. And self-driving vehicles are coming, although we’re probably a good five to 10 years away from that. Even if you have implemented the current technology, you still need to have the driver in place.
Q: Has the driver shortage migrated from the long-haul sector to regional and short-haul services?
Galvao: That's also a problem. We have a lot of competitors from large distribution centers, operated by Amazon and other e-commerce providers, with comparable wages. Some people would rather work in a large distribution center than drive a truck the whole day.
Q: Are there other aspects of a good action plan that you can recommend that would help to alleviate this crisis?
Galvao: It's very important to know your operation. You need to make sure that you have a good scheduling procedure in place, to maximize loads and deliveries. You don't want to be running carriers with empty space, or repeating the same route multiple times. You want to reduce the number of stopovers, so having some intelligence behind your routing will definitely help.
Working with sales to address the challenge of customer demands can help. For example, if you have customers that only want to receive loads at one a.m., you need to make sure there's a good rationale for that, and then you adapt yourself to that requirement. It takes a multifunctional approach — it’s not something that's can be dealt with only by logistics. It has to be incorporated into sales, procurement, manufacturing, and R&D from the packaging side.
Q: Isn’t another solution simply to pay drivers more?
Galvao: That's already happening. Wages are going up, along with fuel costs, and that starts hindering margins. Salary increases are an action that we need to take in order to make the job more competitive, but it’s not everything. It's a combination of factors.
Q: What lessons can we learn from this experience, to prevent being caught by surprise in the future?
Galvao: You need follow market indicators such as van load-to-truck ratios, which tell you about freight demand and truck availability. That ratio has been on the increase since 2015. For flatbeds in April of this year, it was five times higher than two years ago. It’s a very serious situation.
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