Rising fuel prices, supply chain issues and lack of quality drivers are plaguing transportation and logistics, leaving industry professionals wondering if there is any end in sight.
Over the last year, the trucking and logistics arena has had its share of woes. The price of fuel has skyrocketed, thanks in part to the Russian war on Ukraine. That, paired with the continued lack of quality drivers, makes life difficult for transportation companies.
“Fuel has been the largest change in transportation and logistics since 2021. The price of fuel is incredibly difficult to deal with right now,” says Patrick Shannon, president of Springfield, Ill.-based SyMy Capital, adding that diesel prices are up 72 percent year over year, with the end user always paying. SyMy Capital focuses on serving small flatbed trucking companies and brokerages. His clients may need business, operational and human resource development, as well as assistance with processes, efficiencies and procedures that small carriers might not know about.
Fuel prices are volatile, and, like everyone in America, trucking companies are paying a steep price. It won’t be long before a shipper is paying more for fuel and transportation than the product’s worth, says Scott Cordin, president, Steel Express Logistics, LLC, Chicago, Ill. “Every week we get a new per-mile rate.”
Brent R. Brodie, owner of KCG Transportation, Inc., concurs. “Fuel prices are causing the most instability in rates over the last few months and it doesn’t show any signs of easing up,” he says. “Rates that I gave last week can’t be counted on to be good. There is a huge backlog of loads on most lanes, which only compounds the problem.” He adds that recently a customer had to pay $1,200 more just to get a load moved.
And on the heels of volatile fuel prices come soaring fuel surcharges. They’ve increased 30 to 40 percent, according to Cordin. And surcharges are unpredictable. Surcharges change weekly, and those charges are passed along to customers, says Roberto Alvarez, CEO of Esmark Steel Group, Chicago Heights, Ill. The business is increasing its fleet of trucks and trailers to better manage costs and increase predictability for its customers.
According to Jan Richter CEO, Dearborn Steel Express, Inc., Dearborn, Mich., diesel prices skyrocketed quickly after the Ukraine crisis began, and he believes the fuel prices will stay high for a while. Furthermore, he agrees with other industry professionals that fuel surcharges are further hurting the industry. “In the heavy haul industry, FSC does not cover 100 percent of fuel cost, so the large increase in the price of diesel is hurting margins, which are small in our industry as it is,” he says. “Prolonged high diesel prices in this range may start to force smaller companies, or some owner operators, out of business.” Driver Turnover
Exorbitant fuel costs and surcharges pale in comparison to the shortage of quality drivers. “At the end of the day, if you don’t have a quality, safe driver that you can develop working with your company, the fuel won’t matter because your truck is going to be parked,” says Shannon.
The story for transportation industry employees is the same as that for so many industries. When older, more seasoned drivers retire, often no one wants to or can take their place.
“We’re seeing retirement of aging drivers draining the talent pool, and the younger generations are pursuing careers with retailers and consumer/commercial shipping partners, which can offer more attractive working hours and less time on the road,” says Alvarez.
Richter says to retain drivers, he and Owner Kristin Richter talk to them frequently, hear what they have to say about lanes and customers they like, and ultimately treat them in a way that makes them feel heard and appreciated. That includes greater flexibility to address personal issues that may require time off beyond what the handbook says, dealing with the issue on a case-by-case basis, he says. That kind of approach has helped retain its drivers and has even seen an uptick in interest from drivers who are with competitors.
Overall, the shortage of quality drivers has ominous consequences for the industry, particularly if smaller operators decide they can no longer make a living and exit the market. “You may see some consolidation in the industry, and you may see some smaller trucking operations shut down, and rates will likely continue to increase.” Richter suggests that additional government intervention could help, saying something similar to PPP loans during COVID could help trucking companies avert a massive failure.
Quality drivers also means responsible, safe ones. In some cases, drivers jeopardize their own and others’ safety, let alone the safety of the product and truck.
“A gentleman loaded some steel the other day, and instead of using chains and chain binders, he used straps. Steel will cut through straps like scissors,” says Joseph Esposito, owner and operator of Verrazano Trucking & Rigging, based in Staten Island and Brooklyn, N.Y. He adds that the goal of drivers should always be to be safety-minded first and foremost and to be cautious and courteous. With seasoned drivers who are well-versed in safety retiring in huge numbers, newer drivers might not have these same qualities.
Carelessness among some truck drivers can be mitigated via proper training throughout their careers. The veteran driver needs as much ongoing training and reminders as the rookie, Shannon says. Interest Rates, Supply Chain Issues
Besides the quality-driver shortage situation, high interest rates are oppressive. Some businesses are struggling. “The interest rates going up affects every trucker in the country because most of them have lines of credit and those lines of credit aren’t fixed in stone; they go up with the interest rates,” says Cordin, adding that increased interest rates are going to make purchasing equipment cost-prohibitive.
However, Esmark Steel Group has been successful at building its truck fleets to meet customer needs. “We are increasing our fleet of trucks and trailers to better maintain costs and give our customers more predictability,” says Alvarez. “The trucking industry, for example, is working hard to retain its drivers through improved working conditions and benefits, enhanced truck stops and increased management support.”
And the transportation field is subject to the same problems that are affecting all industries: supply chain bottlenecks. Congestion at the borders and other impacts of the global crunch are being felt by trucking companies, Alvarez says. Brodie agrees. “There is a shortage of trucks and drivers, especially in the flatbed market,” he says, adding that one carrier told him there was a 15- to 24-month wait on the delivery of a new tractor.
While many elements that affect the transportation industry cannot be controlled, all companies can do is manage the best they can. For example, Esmark Steel Group focuses its efforts on building and enhancing strong relationships with customers. That’s done through open communication, transparency and customer service, Alvarez says.
Supply chain issues seem never-ending. “Because we’re in a global economy, the outlook of domestic rail is very much impacted by import and export and ports like Seattle and Los Angeles harbor and Savannah, Ga.,” says Dennis Wilmot, president and CEO of Iron Horse Logistics Group in Aurora, Ohio. “It looks like a D-Day invasion; there are so many ships out on the horizon.” Although the total number of ships has decreased, many are still trying to get to ports. Wilmot believes this scenario will continue through 2022, although he anticipates that this situation will improve as the year goes on into 2023.
The problem isn’t limited to the highways or ports. “Whether it’s ocean, trucking or rail, there is a lack of vehicles and operators,” says Alvarez.
When it comes to rail, employee shortages are also a widespread problem. The No. 1 issue in railroad transportation is service, Wilmot says. That problem is exacerbated because of a shortage of car supply for shippers. To make matters worse, during COVID-19, massive layoffs and shutdowns reduced the numbers of workers, as was the case for many industries. And adding insult to injury, finding individuals who want to work in rail is a huge challenge, partly because the working hours are difficult and sometimes workers have to go out of state.
Between loss of employees and those working remotely, Wilmot says it’s difficult to provide optimum customer service. “Service is more than just having the trains run well; it includes keeping the customers informed, and you have to have people to do that, and the people to do that have either been laid off or working from home, and there is a loss in efficiency in many ways as a result of that.”
He adds that while rail companies are aggressively trying to hire and replace lost employees, this task seems insurmountable. “Railroading is not assembly line work or other kinds of work where training can ramp up pretty quickly; a week or two, and you’re fine working at McDonalds or many other jobs, but for the railroads, for safety, for an engineer to be able to operate a train, or a conductor to be able to know how to run the train, it takes several months of training before they can be qualified to work,” he says.
And maintaining a company’s rail fleet is challenging. Getting supplies and parts in just to replace parts and operate a business in the railroads themselves has been constrained due to a combination of the virus and shutdowns overseas like in China and Taiwan and so on, he says. Transportation’s Future
The future of transportation depends largely on technology. For trucking, technology aids in the tracking and tracing of a truck, letting the companies know whether the truck is even running and where it’s moving. “We could pull a truck up on a map right now and tell you that you’re going to get a load of steel delivered to your doorstep in the next 15 minutes,” says Shannon. He says that communication with customers is easier than ever before, whether it be via email, text or transportation management software. People put their loads on the TSM system, where everyone who hauls material can see them. From there, companies will be able to get the best opportunity for moving the load with all their different carriers, rather than picking up a phone and calling each individually.
In rail, there are also efforts to use technology to bring more visibility, not just to the railroads, but to bring better visibility to the shippers about their shipments. “One example of that is something called RailPulse, where several different companies are working together on a technology platform to help bring that visibility to shippers,” says Wilmot, adding that the quandary is getting the technology deployed and properly structured so it is effective. “I think one of the issues is that the railroads all operate independently from one another,” he says.
Despite all the challenges, there is some good news. Shannon believes that flatbeds in the metals world have a positive future, especially considering the infrastructure bill. The materials needed to build infrastructure are predominantly hauled on flatbeds, which bodes exceptionally well for the steel and flatbed industries. “Everything you think of in terms of building the infrastructure in our country,” he says, “you need a flatbed to get it there.”
Alvarez agrees, saying, “We’ve seen issues with the global supply chain, but we’ve also seen the Build Back Better legislation pass, which is promising for our highways, bridges and infrastructure.” Caption:
Fuel prices are volatile and trucking companies are paying a steep price.
(Photo courtesy Steel Express Logistics, LLC)