As we feast our way through the holidays, perhaps the best way to provide perspective on the trucking sector in 2022 is to view it as a holiday recipe.
There are three ingredients that make up trucking: the people, the freight they move and the trucks they use to move it.
Each of these three were critical to what happened in 2022—and will be to what happens in 2023.
People
Any discussion of the people side of trucking has to include the ongoing driver shortage. It’s been listed as the number one concern in trucking for four of the past five years in the Critical Issues in the Trucking Industry report put out by the American Transportation Research Institute (ATRI).
Overworked during the pandemic and historically underpaid, drivers’ lot improved in 2022 as wages rose over 10% per the American Trucking Associations (ATA).
Instead of leveraging the wage increase to make more money, ATA says almost 40% of drivers used the opportunity to actually work less hours for more money in 2022. Some trucking companies and private fleets are addressing drivers’ demand for more home time by shifting their business models to include services like final mile, white glove, and regional runs to allow drivers to get home at the end of the day to their families.
Not enough home time is already one of the top reasons drivers consider switching to another fleet. Which leads us to the topic of driver retention. Turnover in the industry averages 100% turnover with extremes of 150% or more in some cases. Most of that turnover is from drivers moving from one fleet to another, rather than leaving the industry altogether according to ATA research.
Fleets and carriers have to work harder than ever to hold onto drivers—a trend that’s sure to continue into the new year. With driver wages and signing bonuses already inflating compensation, there’s more pressure to provide the best driver experience. From what we’ve seen, improving retention starts with being truthful about wages, home time and benefits during recruitment. Simply put, misled drivers don’t last…
Freight
High inventory levels dominated the topic of freight in 2022. Going into the holidays, retail inventories were at all-time high levels and discretionary spending was trending down according to Bank of America Retail Analyst Lorraine Hutchinson. In addition, imports to the U.S. dropped 11% from September 2021 per U.S. Customs data aggregated by Descartes.
These factors have softened the amount of freight flowing by truck. It looks like inventory levels will probably continue in a more guarded perspective in 2023 because companies don’t want to get stuck holding the bag with overinflated inventory levels.
Even with the glut of inventory, supply chain disruptions continue to create shortages in things like computer chips and auto parts as well as random out-of-stocks we’ve all personally experienced. It goes to show that there are still plenty of uncertainties affecting freight.
They include increased demand for trucking capacity at East Coast ports as a result of ocean cargo diversion from West Coast ports. There’s a question going into 2023 about how trucking companies will respond to this potential new volume. Also, the uncertainty regarding rail service will certainly continue into 2023. A forced settlement could just postpone a strike or lead to work slowdowns that move more freight to trucks.
Lastly, freight rates dropped 30% from December 2021 to October 2022 and will likely remain lower for most of 2023. What’s good news for shippers is bad news for a lot of owner-operators and small carriers who are leaving the industry—potentially taking capacity with them that may affect the supply of trucking in the future.
Trucks
As short as the industry is on truck drivers, it seems to be almost as short on trucks. We’re hearing stories of carriers who’ve been waiting six-months for new vehicles. New truck prices have soared and used truck prices are double or triple what they were a year ago. High equipment costs are a major contributor to today’s high trucking costs which are at their highest level in 15 years, according to ATRI’s Analysis of the Operational Costs of Trucking: 2022 Update.
Fuel is another top cost of trucking. It was the number one trucking industry concern in the 2022 ATRI report. 2022 diesel prices were up over 35% year-over-year, and they are projected to remain above $5 a gallon into 2023. That’s driving high shipping charges that get passed along to the final consumer in the grocery store aisle. In addition to fueling inflation (pun intended), $5 diesel is forcing carriers to make hard decisions about low profit routes and difficult customers.
Truck safety also moved to the forefront in 2022. In September, the Federal Motor Carrier Safety Administration (FMCSA) revived its push for mandated speed governors in trucks and will release new rules in June 2023. The move will improve safety and cut fuel costs, but probably increase transit times and shipment delays as well.
Another big safety issue is the lack of truck parking—the number three trucking industry concern in the 2022 ATRI Report. Trucks parked along the highway endanger truckers and the motoring public. Both the House and Senate are pushing legislation to fund more parking spaces. We’ll see if our industry can get more than just words out of Congress in 2023.
On the regulatory front, California’s AB 5 law regulating independent business owners—including independent truck drivers—is inspiring other states and the federal government to pass similar laws. The movement is a big threat to the owner-operator model that moves much of freight in the U.S.
Regulations that make it hard to make a living are a leading reason for truckers disliking their job today. That brings us full circle back to the people ingredient of trucking. Amidst today’s market uncertainty, a winning strategy going into 2023 for shippers trying to secure capacity and carriers fighting to recruit drivers would be to carefully listen to the needs of the driving force.
Parking is a key example. It was the number one concern of drivers in the 2022 ATRI report. Allowing overnight parking or letting drivers park in the yard are just two ways a shipper or carrier can listen to drivers’ needs.
If listening is not your strong suit as a trucking company or private fleet, now’s the time to create a driver advocate position or hire a workforce solutions provider who has that expertise.
