Challenges facing the logistics industry have been making headlines since the news of COVID-19 reaching the United States in early 2020. While many of these crises followed the statewide emergency lockdowns, the severity of existing challenges has also been magnified. The U.S. truck driver shortage is a prime example.
This issue has been a hotly debated topic for decades. The American Trucking Associations (ATA) first raised concerns in the 1980s. More recently, the ATA reported that, “the trucking industry needs an additional 60,800 truck drivers immediately;” they also expect this number to “grow to more than 160,000 by 2028.”
The trucking industry in the United States generates upward of $800 billion annually. As consumer expectations of nearly “instant” delivery continue to grow, manufacturers and retailers are looking for reliable ground transportation to support their ecommerce operations. The debate about the driver shortage is based on the expectation that the demand for Full Truckload Shipments (FTL) is outpacing the supply of truck drivers to transport shipments.
However, some experts deny the existence of the issue. Todd Spencer, the president of the Owner-Operator Independent Drivers Association has mentioned in a previous statement that, “there is no shortage.”
Some analysts are suggesting the market is already experiencing a rebalancing to address the gap between supply and demand. This can be seen by the increase in tender rejection rates and record freight rates. Tender rejection rates are the percentage of “contracted loads offered by shippers to carriers that are rejected.” This typically occurs when a carrier abandons a contract for a more profitable opportunity, thus leading to higher market rates.
While the law of supply and demand may be at play here, the true culprit for a lack of available transportation options could very well be dark capacity and a lack of efficiency. Dark capacity is best described as available space on trucks that can transport a shipment but is unknown to or not offered to the freight-buyer or shipper (the buyer or shipper is the retailer or manufacturer seeking capacity to transport freight).
The Census Bureau’s 2002 Vehicle Inventory and Use Survey reported that 18 percent of “for hire” FTL freight were driving on empty miles resulting in $61.74 billion worth of waste. The survey revealed that private fleets were losing $114.25 billion on empty miles.
There may be a natural inclination to place blame on a segment of the industry. In reality, trucking, logistics and supply chain are some of the oldest industries. As the economy matures, new shippers, trucking companies and logistics service providers enter the market. The industry remains highly fragmented, with 97 percent of trucking companies owning less than 20 trucks each. This fragmentation only further entangles an already complex industry.
Transportation and logistics continue to be essential as more than 70 percent of all goods and products in the United State are transported in trucks, yet standard processes and widely used technology remains relatively antiquated, making this sector ripe for disruption.
Other industries have benefited from disruptive innovations including finance, healthcare, and hospitality — so why not trucking and logistics?
The easiest way to address the shortage is to add more assets such as buying more trucks and train more drivers. But this takes time, requires working capital, adds cost, and more trucking companies actually further fragment capacity.
The competitive nature of the industry and traditionally slim profit margins would benefit more quickly from the use of new technology. Higher capacity utilization and reduced empty miles can be a solution to the driver shortage today.
What does this technology look like? To increase capacity utilization, digital marketplaces allow carriers to offer unused partial capacity and empty capacity to shippers. To reduce empty miles, software with route optimization can match trucking routes between shippers and carriers to support the continuous movement of trucks.
It’s important to note that the industry needs tools that enhance the human element within the trucking industry. If deep-rooted inefficiencies can be untangled, capacity utilization can be increased, then operating costs can be reduced and profits can grow and enable the next renaissance in trucking.
Matt Tabatabai is founder and COO of ZUUM Transportation.