Saturday, July 26, 2014

Drivers Wanted

The truck driver shortage has finally reached the tipping point. The shortage has been around in varying degrees for over 30 years. After the industry was deregulated, truckload carriers started growing like crazy. Supply chains were redesigned and truckload carriers began hauling direct from manufacturing plants to store shelves. Truckload networks evolved to optimize service, utilization and empty miles. Drivers were not paid much, the trucks were plain vanilla and they stayed on the road 2-3 weeks at a time.

Pretty soon the industry figured out that there were not enough people willing to drive those trucks, for that pay, under those conditions. So the trucks got nicer, the pay got bumped up a few cents per mile and efforts were made to get drivers home more frequently. This formula was updated and used repeatedly depending on the state of the economy and the demand for trucking services. In addition to nicer trucks, more home time and a little extra money; carriers tried to become more “driver friendly”. Different approaches were tried operationally to improve communication and make sure that driver needs were being met. All sorts of programs and gimmicks were utilized to attract and retain drivers. Just make the job not suck and convince the drivers that they were highly valued team members and you might win the driver battle. And winning the driver battle meant beating your competition. It’s like the old joke about two hikers being chased by a bear. You don’t need to outrun the bear, just the other hiker. No one was really “winning” the driver battle. Some carriers just ran faster than others.

But now the industry is facing the perfect storm. It’s hard to find anything positive in the driver supply formula. Demographics, negative. There simply aren’t enough qualified younger people entering the workforce to replace the older drivers.

Regulations, negative. The regulatory environment has effectively taken drivers out of the pool either directly or the drivers have just given up on the industry and walked away.

Working conditions, negative. While the trucks may be nicer and easier to drive, and drivers get home more often; it’s still a tough job. Traffic congestion in particular has gotten much worse. Drivers are being paid by the mile and end up spending a lot of time just sitting in traffic gridlock hell. It’s much worse than it was only a few years ago.

Compensation, negative. When all of the hours are taken into account, not just “on duty”, the effective pay rate per hour is pretty marginal.

Competition from other industries, negative. There simply aren’t enough literate, drug-free, legal workers available for blue collar jobs that require literate, drug-free, legal workers.

This week Swift, the nation’s largest truckload carrier, stock dropped 18% when the company said that it was “constrained” by a challenging driver market in the second quarter, that turnover was higher than anticipated and offered guidance that EPS for the current period would be 3-7 cents below analysts’ estimates.

I predict that more large carriers will report that the driver shortage is having a major negative impact on earnings. I think we are on the cusp of a mega shift in the trucking industry. Rates will go up dramatically. There is no other option. By 2020, I predict that rates will be 40-50% higher than they are today (net of fuel surcharges). Some of that will go directly to drivers. Some will go toward equipment. Some will go to cover the cost of training and retaining drivers. This increased cost of moving freight over the road, will push more freight to the rails, elevate inventory levels and significantly impact the locating of manufacturing, processing, assembly and distribution points. And just about everything is going to cost a bit more. We’ve enjoyed a long run of relatively low logistics cost, much of it on the backs of working folks who just drive trucks for a living. Nothing last forever.

Wednesday, July 16, 2014

2nd Opinions

Several weeks ago I related the stories of my shoulder MRI, my surprise at the severity of the injury and the ultimate skepticism that led me to cancel the surgery and get a second opinion. So on Monday I got that second opinion. My wife went with me for the appointment, so I was prepared for a lot of second opinions. On the way to the appointment, I told her that my gut feel was that he would give me a shot and send me to therapy. There was just no way that my shoulder was that bad. She shook her head and commented that the shoulder has been bad for almost a year and that the first opinion was probably spot on. Nevertheless, she was glad that I was getting a second opinion and hopeful that if I did have surgery, I would have it done in the city.

Well, the second opinion was the same as the first. Only this time, the surgeon went into more detail. I suppose knowing that it was a second opinion, he decided that he needed to give me a full explanation.
Without going into all of the details, the bottom line is fix it now or else it will get much worse and may become un-repairable. To her credit, my wife did not say a word. At least not until we got back in the car and headed home. Man, that was a long drive.

And sometimes things just have a way of working out. The surgeon had a cancellation this Friday (probably some stubborn guy who decided to get a second opinion). Instead of having to wait a couple of weeks, I can get this over with now. So very, very early Friday morning we’ll be driving down to Big D for surgery. I’ll be back home Friday afternoon, arm in a sling and sleeping in a recliner for a couple of weeks. Been there done that, so I know what to expect. And oh by the way, my wife also gave me a second opinion. In her opinion, I’m really hard-headed and if I had listened to her, all of this would have been done last fall after the initial injury. Ok, Ok…I get it. I hate it when she’s right.

Saturday, July 5, 2014

The Job Market

So at the half-way mark of 2014, what does the job market look like for transportation, logistics and supply chain management professionals? My short answer is that it’s good, but not great. I might even call it very good for highly mobile candidates who have certain skills and experience. To be more specific, I would describe our job market in terms of good news and bad news.

The Good News:

_1 The job market in our industry is the best it’s been since before the Great Recession. It really started to bounce back in late 2011 and has continued to improve. And, I expect continued improvement through 2016 at least.

_2 The housing market has rebounded to the point where more people are not underwater on their homes so relocation is possible. Plus the overall improving job market makes it a bit easier for relocating spouses to find new employment. But this is still a challenge.

_3 If you are a safety, maintenance, operations or capacity development professional (and you are mobile), there are plenty of opportunities out there.

_4 Compensation/relocation packages are showing some signs of improvement. Are they where they need to be? No, but reality is starting to set in with employers.

_5 There just aren’t a lot of experienced (and mobile) transportation and logistics professionals. Especially on the “service provider” side, i.e. truckers, 3PL’s, freight forwarders, warehousing/distribution/fulfillment, final -mile, intermodal, etc. Over the past decade the transactional brokerage companies are really the only ones who have aggressively hired, trained and developed new talent. Unfortunately a significant number of those individuals do not stay in the industry and those who do tend to do very well and stay put. If you are a candidate, this is good news. If you’re an employer, not so much.

The Bad News

_1 Employers are being very selective. There is still a perception that there are “lots of good people out there looking for work.” So employers are not willing to “settle”. And if they do have to “settle” they will tend to hire on the cheap, promote from within or hire someone “from their network”. They are certainly not at the point of paying a premium (or paying a headhunter’s fee) for marginal talent.

_2 Given that employers are being “very selective”, the interview and hiring process tends to be increasingly long and tedious. However, we are starting to see employers losing out on candidates because they take too long to make a decision. Eventually, if this happens often enough, employers will begin to accelerate the process.

_3 The demand for sales professionals (direct contributors as well as managers) is way off. With freight volumes exceeding capacity at levels we’ve not seen in decades and no real solution to the capacity problem, companies are reluctant to add sales overhead just to generate more business they cannot handle.

_4 While the job market is the best it’s been since before the Great Recession, it’s still not back to 2004-2006 levels. Back then I would say that employers were so in need of talent that they looked for reasons to hire a candidate. Today it seems that we’re in a market where employers look for reasons NOT to hire a candidate.

_5 The uncertainty or lack of confidence with respect to our government continues to cloud expectations. I think it’s fair to say that most transportation/logistics industry leaders are concerned that whatever comes out of Washington is more likely than not to be unfavorable to their companies.

Ever the pessimist, I hope for the best but always expect the worst. But that said, I am actually pretty optimistic about the job opportunities in this industry. Stuff has to be moved from point A to point B and regardless of modes, points of origin and destination or the nature of “the stuff” being moved; it’s a process that requires equipment, facilities, technology, energy, money and people. It’s always a puzzle and it’s always changing, but it’s always there.

Tuesday, July 1, 2014

And Then There Is Skepticism

“The path of sound credence is through the thick forest of skepticism”- George Jean Nathan

The “Pessimism” of June 28th turned into “Skepticism” on June 30th. A weekend of talking to friends and family about the upcoming shoulder surgery led me to postpone it. That’s a lot of wasted money on pre-op testing, but you know what…it’s my shoulder. Maybe it was the good round of golf Saturday afternoon; or maybe a couple of stories about people recovering from torn rotator cuffs without surgery; or recalling my rule about always getting a second opinion before letting someone cut you open; or maybe it’s just the fact as noted before that I’m still doing chores and working out and functioning pretty darn well even with a torn rotator cuff; or maybe I’m just a coward and don’t want to go through the rehab again.

Whatever it is, I’m getting a second opinion in a couple of weeks. (And if I don’t like that one, I may get a third.)