The truckload industry is $337 billion worth of functional mess that results in starvation wages for drivers and poor results. Carrier firms are cheated, and drivers are exploited. Brokers exist for no reason. And the customer is the only one coming out well because the customer is the shipper, and the shipper dictates the prices that suit their needs. An overhaul of the truckload industry is long overdue; one where we truck drivers actually get the payoff we deserve.
In this corporate capitalism-based system, truck owners, large and small, profitable or not, are treated almost identically to how they treat their drivers - like expendable tools, even though the industry only exists because of them. Their value to corporate America, lawmakers, and shippers, manufacturers, distributors, and retailers alike is limited to their sole function, which is to arrive on time without incident. This means they are worthless when they arrive late or when the freight they haul is damaged or stolen, and powerless when they want to effect change that benefits them or the industry they serve.
The two best examples of this are:
What we've ended up with is the perfect environment for shippers, which is hundreds of thousands of small carrier firms, creating the absence of economies of scale, the inability for carrier firms to set prices (they are price takers), generating low profits and low prices for shippers or consumers.
The truckload industry needs more trucks to provide greater service coverage, but significantly fewer truck owners to aid in improved utilization, better service, and greater profit. Unfortunately, the industry is overrun by hundreds of thousands of truck owners, and no one is doing anything to fix it.
A gross excess of truck owners is the root cause of everything that is wrong with the industry today.
It is the reason why:
Too many truck owners is not only the most costly problem to truck owners, it is potentially the most devastating in American trucking history.
Small truck owners and independent truck owner-operators are a malignant cancer to the industry. Most are amateur entrepreneurs. They unwittingly waste millions of dollars every year, and lack the foresight and discipline to protect and nurture the two things that matter most to them - fair and equitable market prices, and healthy competition.
They use money inefficiently, and are undercapitalized. They typically make imprudent purchases or structure their debt unwisely. Most of all, they wittingly undercut already unhealthy freight rates because they can.
They are the greatest threat to large truck owners and the health and stability of the industry. Without realizing it, they exist not because the industry needs more trucks but because wealthy global capitalists, who are master practitioners of commerce and economic warfare, recognize the opportunity to exploit them to achieve excessive competition and low freight rates.
Shippers expect a reliable on-time service that consistently provides a quality driver, total coverage, real-time visibility, honest communication, and the versatility to respond responsibly to change at any time. But the service they get is much less, and its almost always because of an undercapitalized truck owner or an inexperienced or undisciplined truck driver.
But the real tragedy is that truckload carrier firms look to innovation to compensate for deficient drivers rather than to improve drivers or complement quality drivers. A good example of this is outfitting new trucks with a range of new and elaborate sensors and intelligent software that thinks for the driver and even reacts faster than a driver would, rather than stepping outside comfortable boundaries to employ
the best drivers, and give shippers the real-time visibility they want and up-to-the-minute status reporting of their freight using software-as-a-service.
Companies often put inexperienced drivers in the seat just to get a truck moving. The average quality benchmark of a driver employed by the top carrier firms is a 1:9 ratio. This means for every one driver with 5 years experience and no accidents, there are 9 drivers with less than 2 years experience.
If this ratio was reversed to a 9:1 ratio, meaning that the majority of drivers had more than 5 years experience, it would completely transform the industry in terms of productivity. Just think of the huge difference that a well experienced and disciplined, responsible driver with great communication skills could make to the efficiency of a delivery, the public image of truck drivers, and the service that a carrier firm can provide.
As a direct result of the current status quo, where inexperienced drivers make up the majority, truckload carrier firms are suffering from huge lost opportunity costs and are unable to guarantee a quality service.
Distracted driving is the single-largest threat to public safety on public roadways today. Nobody talks about it, and nothing is being done to fix it.
In ALL of the top 10 driver-reported factors in truck wrecks in 2015, distracted driving was the root cause. Studies have shown the biggest contributing factor to distracted driving (62%) is drivers being lost in thought.
With high occupational stress, low access to health care, and time spent away from families, it's no wonder that truck drivers have trouble keeping their minds on the road. By far the biggest cause of driver stress, and the reason so many leave the industry, is low pay or not being paid for work they have done. It's hard to concentrate on the road when you're on the brink of financial ruin.
The industry standard for time to train new recruits is 4 to 6 weeks over-the-road. That's it. No continued education or driver development programs exist nor have ever existed to ensure truck drivers are safe and efficient drivers. This hurts drivers, customers, and the public.
The compensation models of cents-per-mile and percentage-of-load used by carrier firms is grossly inadequate and fails to reward the driver for the many extreme responsibilities and challenges they carry.
A good trucker is a skilled tradesman and their time, all of their time, deserves fair compensation. Whether it includes checking the safety of their vehicle, waiting for repairs during a job, or waiting on a load. If a truck driver is stuck in traffic, he is still responsible for his truck, his trailer and what he carries. He should be paid accordingly.
Think of how costly, at least, and dangerous, at worst, it is to have drivers angry, anxious, depressed, regretful, and fearful of financial ruin when they climb behind the steering wheel of an 18 wheeler and are expected to conduct strict paperwork and inspections and get our loads to the shipper within steep expectations. Distracted driving is pretty much a given under these circumstances.
The pricing model for truckload freight is rigged against carrier firms, and this unjustly impacts operating ratios in every worst way imaginable. Shippers dictate market price, and of course, they base it on factors that directly relate to their own profit. They expect the carrier firms to absorb some of their own costs that have nothing to do with hauling freight, such as increased labor costs or rate wars between two retailers, and have no government incentive to consider whether carrier firms make a profit.
The modern day broker is a clumsy, archaic version of software-as-a-service 1.0. Their original function was to cultivate the growth and proliferation of the cancerous small and independent truck owners and prevent them from talking to customers. But now, they are multi-million dollar enterprises forcing a need in an industry where the need is no longer necessary.
Of all the issues affecting the truckload industry today, driver shortage is the most devastating. The lack of higher pay, the extreme working conditions, the physical and mental demands mean a new generation of potential workers is just not interested in driving, and this is a huge problem.
The average age of a truck driver today is 46-years-old, meaning there's a whole generation of drivers due to retire in the near future. Already the industry is struggling with only 3 million drivers struggling to operate 2.5 million trucks, because these trucks need to run almost 24/7 to keep up with the 400 million class 8 shipments that are demanded in the US each year. Americas trucks need 48,000 more drivers right now just to be able to operate properly, and that need is set to increase.
Truckload carrier firms are paying an opportunity cost of hundreds of millions of dollars in net annual earnings because they're short staffed, which in turn costs the shippers who have extra inventory waiting to haul. Unless the driver shortage ends, carrier firms will be unable to grow organically and the issues that plague the industry will continue for generations to come.
There are eleven compelling reasons to overhaul the truckload industry. It is unconscionable not to as it is a slave labor, stagnating industry, and the detriment it is doing to us truck drivers could make us a hazard to fellow drivers and our families. We begin overhauling the truckload industry by solving the driving shortage, which could take less than 90 days. Subscribe to www.truckonomics.org to learn more.