There’s a saying in sports that goes something like, “A team is only as good as its weakest player.”
In terms of the supply chain, there isn’t necessarily a weak player. The entire team has been completely shaken, leading to a series of slowdowns, delays, shortages, and demand issues that leave everyone unhappy.
One of the largest culprits in recent months has been an increase in crude oil, diesel, and gas prices, which is creating uncertainty across the globe and driving up prices across the entire supply chain. But before we all jump onto the “gas is too high” bandwagon, it’s worth noting that gas prices aren’t the only weak link in the supply chain’s chain.
Nearly three-fourths of U.S. freight is transported by truck, making a trucking shortage a pain point for companies across every American industry segment. An estimated $800 billion is spent each year by shippers on trucking services, creating a headache for companies that rely on trailers to move their products.
The industry is dealing with several crises concurrently, and there isn’t a panacea available to cure everything all at once. Improvements are slowly occurring, but it will take time to rectify each supply chain issue. Until then, everyone has to deal with the pain of higher prices, longer lead times, and delivery delays.
Fuel costs have dipped slightly from record highs in March 2022, but the average price for a gallon of gasoline is more than $1.35 than a year ago.
The same sharp rise can also be seen in diesel prices, as the cost per gallon has shot up roughly $2 over the same one-year timespan. These price hikes don’t just mean a bigger gut punch at the pump, either. In the trucking industry, higher diesel prices mean higher costs to pick up, carry, and eventually deliver freight. In addition, the cost of deadheading is not only expensive and wasteful but terribly inefficient during an age of increased productivity.
As raw materials move through the supply chain, additional costs get tacked on until the product or service has reached the end user. From copper to cookies and everything in between, prices are rising because it is becoming less possible for suppliers, manufacturers, and distributors to eat the costs themselves. Someone, or something, has to give. It isn’t an easy decision to make, but price hikes are a necessary part of doing business until conditions improve.
Gas prices aren’t going magically come down overnight, and with so many factors determining the overall price we pay at the pump, it’s likely a solution is going to be further down the road than we’re hoping for (pun not intended).
In the meantime, the more suppliers, manufacturers, distributors, and end users work together, the easier it will be to remain transparent about what’s going on and work toward solutions. For manufacturers like Kris-Tech, giving clear signals about lead times, price changes, and delays allows for more opportunities to collaborate and find answers.
For now, every step of the supply chain needs to be ready for longer lead times, accommodate for supply chain delays, and maintain open lines of communication. By practicing these two actions, facilities along the supply chain can more easily manage expectations and anticipate limitations.
In the early days of the COVID-19 pandemic, millions of workers were laid off, furloughed, or short-shifted due to shutdowns and restrictions, causing unemployment rates to skyrocket for a short time. While it’s easy to point the finger at the pandemic and say, “AHA! That’s why there aren’t any truck drivers,” the real labor shortage problem has been years in the making.
According to CNBC, the truck driving industry was short about 80,000 workers in 2021, not all due to the pandemic. Low wages, difficult and lonely conditions, and a lack of truck-friendly places to stop put a damper on the industry, even when the labor markets were good.
Mary Murphy, Sr. Director of Managed Logistics Strategy for BlueGrace Logistics, says the problem with getting more truckers into the seats of trailers is a two-fold issue. The average age of a trucker continues to creep up, and many people currently behind the wheel of a big rig are getting close to retirement age. On the flip side, it’s tough to recruit younger drivers into the fold because of regulations associated with getting a CDL.
“You can’t get a CDL until you’re 21 years old,” Murphy explained. “If you are going to make a career choice at 18 and you go to a trade school, by the time you’re 21, you’ve likely made a choice as to where you’re going to head with your career. So, to try to get people to change that at 21 and say, ‘Now we want you to get your CDL,’ makes it very difficult to recruit.”
More importantly, as more drivers retire and leave the workforce, new drivers aren’t stepping in fast enough to take their place. American trucking needs an infusion of new blood, but jobs are often going unfilled because younger workers are finding other work elsewhere.
On top of that, the trucking industry still has to become more efficient. When trailers haul anything less than a full payload, it means lost money for the company and higher prices for those who need to move products and supplies.
It would be safe to say that the driver shortage hurts the supply chain. However, if the industry can take a page out of the tech industry’s playbook, it could bounce back to become an attractive option for younger job seekers.
We’ve already touched on what higher diesel prices and deadheading do to the supply chain but getting more trucks on the road will only take you so far. The industry is, for some people, the last resort. Driving a tractor-trailer often means spending days away from family and friends, alone in a truck, sometimes in places that aren’t designed to accommodate overnight visitors. The low pay, tight deadlines, and infrastructure problems don’t help, either.
What’s worse is that there isn’t a shortage of people who could fill those roles since there are plenty of workers with commercial driver’s licenses (CDLs) out there. They just don’t want to take those jobs. So, what can be done to entice them to join the ranks?
First of all, higher wages are great recruiting tools. As we saw during the Great Resignation, there was a solid contingent of employees who felt undervalued in their roles and left their jobs looking for better opportunities.
Higher wages allow trucking companies to tap into a wider array of workers to fill positions. Better technology helps truckers find more efficiency in their work, allowing for fewer deadhead miles and more time hauling meaningful freight.
Companies like Convoy are leading by charge by connecting haulers with shippers through its digital freight network. Their technology allows truckers to keep moving freight, reduce the number of miles their trailers are empty, and earn additional money.
“When I began in this industry, there was a lot of reliance on some very old-school things, telephones, relationships, etc., to figure out how you’re going to fill your truck,” Murphy said. “It is now very easy to use your phone to find other shipments close by you. I think that, in and of itself, has probably reduced some of the deadhead and helped carriers have fewer empty miles.”
As a result, truckers can earn more money and spend more time working in areas and regions they enjoy being in. Shippers, for their part, experience reduced costs and better truck scheduling to get products out the door.
As if gas and labor issues weren’t enough, infrastructure issues create their own havoc on the supply chain.
Road closures can force trucks to take costly detours, diverting them from faster, more direct routes and burning more diesel. Closed waterways and undersized ports create bottlenecks for ships. Our infrastructure can only handle so much stress before it begins to buckle.
To address this problem, the U.S. government is earmarking nearly $3 billion in grants through the Department of Transportation to make roads safer, reduce supply chain friction, and improve intermodal shipping infrastructure performance.
These grants are anticipated to improve freight movement and reduce bottlenecks at key points in the supply chain, whether they occur on the road, on the water, or on the rails.
Understandably, we’re all a little concerned about the supply chain.
Manufacturers like Kris-Tech have been experimenting with finding creative ways to address these problems as quickly as possible and prevent new problems from occurring. This means forming tight bonds between distributors and suppliers to ensure shipments arrive as soon as possible. It includes devising purchase plans, forging new partnerships, and simply being more transparent.
“It does feel like we’re seeing a little bit of a reprieve right now, we’re seeing a little bit of a loosening in capacity and more accessibility to trucks,” Murphy said. “I’d like to say that’s a sign of a calmer and more balanced supply chain, but we’ve had a little bit of whiplash over the last two years.”
It’s going to take time for the supply chain to improve. With that said, building better relationships now may bring even better growth opportunities for everyone later on.
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