Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.uberflip.com/i/443069
COMMERCIAL CARRIER JOURNAL | JANUARY 2015 35 C O V E R S T O R Y : 2 0 1 5 E C O N O M I C O U T L O O K about regaining 1 or 2 percent," says Meil. "Once you've made those opera- tional changes, it takes a while to undo what you've done. Still, the longer-term potential remains to recapture the 3 to 5 percent." Although an increase in productivity will restore some capacity to the mar- ket, Broughton doesn't think it will be enough to discourage higher freight rates. "It doesn't hurt pricing right now because when you get empty, you are choosing from 15 loads," he says. "So if we can improve capacity by 3 percent, suddenly you're picking from 12 loads. There still will be more loads than trucks, and the trucks will be more profitable because the driver again has more flexibility in how to accomplish his work." Still, several items remain on the reg- ulatory drawing board, including a drug and alcohol clearinghouse set to become final in September to prevent hiring driv- ers who previously have tested positive for substance abuse and haven't com- pleted a recovery program, as well as a minimum insurance increase that would double a carrier's minimum liability coverage from $750,000 to $1.5 million or more. If published, that rule could jeopardize small carriers and potentially put many of them out of business. "I fear the current government," said one small for-hire carrier survey respon- dent. "The fear of insurance premiums for cargo/liability going up, as well as all the new laws that get passed before we even know about the last one, makes me say, 'I'm not going to do this much longer.' " Also on tap for 2015 are two rules ATA is supporting, including speed limiters for heavy-duty vehicles and the long-awaited electronic logging device mandate. "The best numbers I've seen constitute a net productivity loss of 3 to 4 percent," says Meil on the topic of ELD imple- mentation. "Your gain is in the form of a better management information tool that provides better utilization, and over the longer term, you may be able to claw back 50 percent of your upfront produc- tivity loss." "I have yet to see a regulation that increases capacity or lowers a carrier's costs," says Costello. "The cumula- tive effect of all these regulations are becoming a larger part of a carrier's operational costs." 1: DRIVER AVAILABILITY (48.2 PERCENT) It's no surprise to see driver availability lead the way as the top industry chal- lenge, as it has been a leading concern since early 2011. Nearly half of all survey respondents chose driver availability as their biggest challenge heading into 2015, which came in at 57.3 percent for for-hire carrier respondents, compared to 49.3 percent from last year's survey. While it was still the #1 challenge for private fleet respondents, only 37.8 percent of that group listed it as the top concern. "The driver is the new customer," says Broughton. "We have to learn how to not only pay a driver more, but make their working conditions more liveable." "The driver shortage issue is a dou- ble-edged sword," adds Costello. "On one hand, it is a restraint on capacity. On the other hand, it is an operational night- mare." Clearly, raising driver pay is the easiest way to attract new entrants to the in- dustry, and open-ended responses to the survey suggest that many fleets are finding ways to do that. "The general shortage of available ca- pacity in the trucking industry is a major constraint on shipment growth, but has allowed pricing increases that both allow us to increase driver pay and improve our yield," said one survey respondent. "Unless fuel prices spike up, I believe our improvement will continue through the year." Fleets across the country are exper- imenting with new pay structures and incentives, and sign-on bonuses are making a comeback. Some fleets even are reporting double-digit percent increases in driver pay to recruit and retain new drivers. Meil cautions carriers on the cyclical- ity of the trucking business and what higher rates might mean in the future. "When you don't have enough supply, prices go up, and labor prices go up as well," he says. "With the inherent cycli- cal volatility of the business, everyone is worried about what [higher driver wages are] going to mean when we get to the stage where the economy weak- ens and freight softens and suddenly we have a higher wage bill." With a steady economy, it's unlikely the driver shortage problem weakens in 2015, and it will be of particular interest to watch driver pay trends to see how carri- ers can compete with other industries to grow their businesses. *based on for-hire respondents only CARRIERS CONTINUE TO GROW FLEET SIZE 2014 2015* Percentage of for-hire truck- ing executives reporting a change or expecting it compared to the prior year Held steady 45.9% Grew 36.5% Shrunk 17.6% Hold steady 49.0% Grow 44.7% Shrink 6.3%