Pages

Showing posts with label driver wages. Show all posts
Showing posts with label driver wages. Show all posts

Saturday, April 28, 2018

Why Are People Using The Driver "Crunch" as An Excuse for Poor Service?

Ok, no more webinars or explanations of how to be a "shipper of choice... please.  I think we all get it that there is a driver problem and there is a capacity problem.  However, as I think about this there are two real issues I just cannot reconcile with the problem.  The two are 1) Lack of delivering on commitments and 2) Lack of investment.

First, lets deal with commitments.  This word really lacks meaning in this industry but I will try to define it. The definition is simply "Do what you say you are going to do" and regardless of tight capacity or not, this is something everyone should be able to do.  Why is freight being left on docks after companies have made commitments (through tender acceptances) to pick up the freight?  If there are no drivers to pick up the freight be up front and honest with the shipper.  Tell them that.  I fear too many companies are just "sweeping up" tenders then, over time, figuring out what they will do and what they won't do (sometimes by just not delivering at all).  I cannot figure out if this is purposeful or if it is just horrible execution. 

This also brings me to the idea that we are blaming ELDs for this crisis which seems ridiculous to me.  Essentially, when someone says that, they are saying they used to operate illegally but now that there is an electronic device they can no longer be illegal. Oops.. that type of argument gets you in trouble.

So, this brings me to my second and final point:  Don't listen to what the sales people tell you, listen to what the CEO's of the companies tell the investors.  The key question you should be asking carriers when they say they need higher rates to offset the capacity crunch is what are they going to do with that money?  If they are plowing back into driver investments then I am all in.  If they are increasing dividends and or buying back stock then you have to wonder who is kidding who. 

My fear is this issue is going to be a circular problem that will never be solved.  Let's follow this logic:

1) How is leadership compensated?  Increasing stock price.

2) How do you increase stock price in a tight market with raising rates?  Buy back stock and raise dividends. 

3) Will the stock price go up as much if you invest the money in driver pay versus doing #2 above?  No. 

This says we likely will not see driver investment or productivity investment.  Rather, we likely will see shareholder investment which will make the problem much worse.

Please prove me wrong by doing the right thing. 


Thursday, October 18, 2012

Housing - Good News Bad News for Transportation

First, I want to be clear that one month's data does not make a trend however we all have to be very pleased with the housing numbers yesterday.  According to the Wall Street Journal,
"On Wednesday, the government reported that new home-building levels surged to a four-year high last month, amid a nearly 12% rise in new building permits. "
As we all know, housing drives a lot of activity or "velocity" in the economy because along with a house comes a lot of other ancillary purchases such as appliances, furniture, drapes etc.  Housing also is a "mood" indicator because, generally speaking, people do not buy houses unless they feel fairly stable about their economic situation.  For these reasons, and I am sure a lot more, having housing move like this is a fantastic sign.  The Wall Street Journal even went so far as saying this movement may vindicate all the maligned recent activity by the Fed.

This is also good for transportation - in a way.  Transportation always gains from housing.  It is that simple and quite frankly housing is almost a singular metric for transportation companies to look at when determining the macro movement of the economy.  The last huge "boom" in trucking came when the housing market was at a froth of excitement in 2004 - 2006.

Now, for the "bad news". Housing is also right up there with manufacturing as one of the highest employment substitutes for drivers.  Drivers can migrate from construction to semi-skilled manufacturing to driving pretty easily and when construction jobs jump, drivers tend to want to move to those jobs.  Why do that and not just stay with trucking?

Two reasons help explain this migration between careers.  First, the time at home factor is big.  If a driver can even come close to replicating their driving income while staying at home they will do that.  Second, there really is no "penalty".  Most jobs and careers there is a penalty for hopping around such as loss of seniority, pay or other benefits.  For the most part (yes there are a few perks for being senior but not many and they are not highly valued relative to time at home) a driver loses nothing by pivoting to construction as they know they can move back to driving anytime they want and they will be welcomed back with a hug and a thank you.

Keep your eyes on these numbers as they develop.  If this is the beginning of a real sustained increase in construction and we get anywhere near close to 800K to 1M starts next year then the driver shortage will exacerbate really quickly.

Monday, March 26, 2012

Driver Wages - Really Going Up or "Signaling"?

An interesting article trying to quantify what driver wages would have to hit to be at the equilibrium point.  However, this data is meaningless unless you determine what the target price is for transportation services?  At what point to shippers move to substitutes to offset transportation increases?

Some may think substitutes are only in the mode of transportation however that is the least efficient way to substitute.  Shippers are always tweaking around the edges with mode transfers etc. however the most efficient and biggest impact areas for shippers to evaluate are activities such as mfg site selection, load ability, inventory trade offs etc.

At what point do transportation rates get so high that the shipper changes their operational methodologies?  Until you know the answer to this question it is hard to determine what wage rate will be the equilibrium / market clearing wage rate.