Tuesday, July 25, 2017

Who’s Gonna Fill Their Shoes?

Who's gonna give their heart and soul
To get to me and you
Lord I wonder, who's gonna fill their shoes
Yes I wonder, who's gonna fill their shoes?
-from the George Jones’ song Who’s Gonna Fill Their Shoes?

There is a lot of talk these days about the ELD mandate (Electronic Logging Devices) and how it will effectively reduce truck capacity. Calculations are being made as to the impact this will have on reducing truckload capacity. The range seems to be from 3 to 7% depending on assumptions about the number of owner-operators and small fleets that will exit the industry and the impact on utilization for those who remain but are just now getting on the ELD program.

I’m inclined to think that the industry has already adjusted, for the most part, to ELD’s. Has it had an impact? Yes. Will forcing all fleets into compliance have an impact? Yes. Will it be the primary catalyst for industry consolidation, higher rates and better pay for drivers? Not so much.

No question the ELD mandate will be the last straw for some small fleets and owner-operators who’ve been hanging on by threads and fingernails and creative paper logs. But these guys have been steadily going under for years. The ELD issue may create a larger wave for a brief period of time. But unless there are some other significant barriers to entry, a new generation of trucking entrepreneurs and disrupters will enter the game.

The real issue for trucking is drivers. And if there is an entry barrier for someone looking to start up or expand a trucking company this is certainly a big one. All other issues pale in comparison. It’s a job very few young people want to do. More money, better roads, more home time, better equipment, more enlightened management, better treatment from customers, redesigning operations to provide for more relaying of loads…there is a long list of factors that could make the job more appealing. But within the realm of reasonableness, I don’t see anything moving the needle on drivers. Truck driving is one of those challenging blue-collar jobs that doesn’t appeal to most folks. Add in regulations, training, licensing and drug testing and there just aren’t enough bodies left in line for the job.

I only see a couple of pools to draw from. One would be immigrants. Bring in more people from other countries who can drive or wish to be trained. Right now the mood in this country is not very favorable toward this approach. But when it gets down to it, people want their groceries, clothing and toys and it takes a truck to make it happen. If that means a Swahili tribesman is driving it, we will adjust.

The other pool comes from the young people who are open to the job but can’t get into it at 18 or 19 years of age. By the time they are old enough, many of them have already found other work. We need to seriously consider putting 18 year olds behind the wheel. There has to be rigorous testing in terms of both skills and attitude. But I’ve met 18 year olds who are more prepared than 30 year olds when it comes to handling the stresses of driving a truck. Age matters, but at some point, it is just a number.

The industry will adjust. There is not just one answer or even two or three. There will be multiple changes that will make the job more attractive and increase the pool of available drivers. But these changes will cost money. Perhaps autonomous trucks will replace some of the miles and do it cheaper. Longer combination vehicles in certain areas could effectively provide capacity. The other wild card is energy. If we can figure out how to move stuff with cheaper energy or a whole lot less of the more expensive energy, that could offset the other cost increases. And, of course, there is the diversion of freight from highway to rail.

But, at least for the next 20 years, I think we’re going to see significant increases in freight costs. The industry will remain extremely competitive and, as always, the cream will rise to the top. Consolidation will occur. I expect market share for the top 10 carriers will triple or quadruple over that time. There will still be a place for smaller, niche carriers. But being big AND being good will be a significant advantage going forward.

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