Driver Dearth Means Higher Freight Prices


Things are getting really tight for American trucking companies.

That means things are going to get more expensive for everyone else, too.

The current driver shortage has been well documented. The American Trucking Associations estimated a shortage of more than 170,000 drivers by 2024.

DAT Solutions, a freight exchange service, reported 3.5 loads per available truck trailer in 2017. Earlier this year it had increased to 6.6 loads.

Such tight capacity has obviously led to higher freight rates as companies looking to move goods have to pay to get a ride. So that’s good for trucking companies, who had been hit in recent years by low rates.

Except for the part that isn’t good: Trucking companies are having to pay more for a piece of a smaller pool of drivers.

Oh, and diesel fuel prices are going up. Oh, and electronic logging devices — at least in the early implementation — are causing some slowdown as smaller companies and their drivers get used to the stricter rules on hours of service.

So what does that mean for the consumer? Guess.

Amazon recently announced it was raising the price of its Prime membership by 20 percent — from $99 a year to $119. Prime membership promises “free” two-day shipping.

Closer to home is Tyson Foods Inc. of Springdale. CEO Tom Hayes said at the company’s first-quarter earnings conference call in February that Tyson’s freight costs were going up to the tune of an additional $200 million in fiscal 2018.

“[F]reight costs have escalated as trucking capacity has tightened nationwide,” Hayes said. “We expect these costs to continue to rise as carriers compete for drivers and new federal regulations come into play.”

How will Tyson make up that additional $200 million? Higher prices, of course.

“But it’s something that we have to do because it’s a cost,” Hayes said. “We’ve got to pass it through. And ultimately, the consumer is going to pay for it at some point.”

Fast forward three months to Tyson’s second-quarter earnings report, when Hayes said that prediction had been adjusted to $250 million. Hayes said in May that freight costs had knocked 14 cents off the company’s earnings per share.

Do the math: 297 million Class A shares multiplied by 14 cents per share = a lot of money.

“We will be working to nearly cover the increase for the remainder of the year through pricing and additional cost reduction programs such as improving truck weights, lead times and improvement projects,” Hayes said.

Trucking companies have been brainstorming for years on ways to attract and retain more drivers. Turnover is a huge issue in the industry — CEO Dan Cushman of PAM Transport Services Inc. in Tontitown told me a few years ago that a driver could call him names in the parking lot and still be hired back, and it was hard to tell if he was kidding.

The obvious answer of raising driver pay isn’t exactly working. Yes, pay drivers more, but the allure of being a truck driver isn’t bringing a whole lot of new prospects to the hiring yard to begin with.

The hours are long, the conditions can be tough, or boring as hell, and many drivers spend days away from home.

When the economy is going well, truck drivers have ready alternatives in industries such as construction. Why not build houses or roads from 8 to 5 and then go home to the family rather than drive across three states and not see your family for a week?

Beside, the driving job will be there after construction season cools down.

“It’s as bad as it has ever been,” ATA Chief Economist Bob Costello told the Washington Post in May about finding drivers. “Companies are doing everything they can to make drivers happy: increasing pay and getting them home more often, but that means they aren’t driving as many miles.”