Driver Shortage Challenges Truck Lines
Not since “Smokey and the Bandit” raced across the nation’s movie screens have truck drivers been so much in the mind of Americans. But the current attention is more like scrutiny than admiration.
The June 7 crash of a Walmart tractor-trailer on the N.J. Turnpike brought lurid attention to a long-simmering crisis in highway transport: a shortage of experienced and healthy drivers at a time when the demands of high-tech vehicles and tight delivery schedules are increasing. Deteriorating roads and bridges and weather extremes exacerbate the situation.
The risk management dilemma for trucking companies is how they can operate profitably and meet shippers’ demands for service and transparency while meeting increasingly stringent federal and state safety regulations.
The Walmart accident killed comedian James “Jimmy Mack” McNair, and injured comedian Tracy Morgan and others in a six-vehicle crash. The National Transportation Safety Board investigation found the driver was going 65 mph in a 40 mph zone.
VIDEO: MSNBC opinion piece on the Tracy Morgan/Walmart collision.
Fatigue was considered a factor, because the driver was just 30 minutes short of the legal limit of 14 hours in service.
Few in the industry dispute the intention of equipment safety certifications, as well as hours-of-service limits for operators. The challenge is that the demands can often be mutually exclusive in an era when drivers are leaving the business, fewer are entering, and those who remain are getting older and less healthy.
The response from operators; their trade group, the American Trucking Associations (ATA); and regulators has been to gather and analyze ever more performance and safety data. However, industry and regulators differ on what data to gather and how to use it. Congress has weighed in as well.
Most recently, on March 5, the ATA asked regulators to modify its safety and compliance system. Not surprisingly, operators and their advocates in Congress favor self-policing, while federal officials advance government regulation.
For example, the ATA has asked regulators not to make crash histories and compliance scores public until the government changes its evaluation process.
Also, regulators are reviewing whether they should increase the minimum financial responsibility of motor carriers. A notice of proposed rulemaking was issued late last year, and ATA says it is gathering input from its members.
All of these debates center on the core issue of the shortage of drivers overall, and the quality of the ones that remain in the labor force.
In his annual report to the ATA Management Conference last October in San Diego, the organization’s chief economist, Bob Costello stated, “Industry revenue and average revenue per mile are increasing nicely as capacity remains constrained. However, the industry is having a difficult time adding trucks due to the driver shortage.”
Costello added that the driver shortage was “as bad as ever and is expected to get worse in the near term,” as freight volumes continue to grow.
As evidence, Costello reported that turnover, a key indicator, rose 11 percentage points to an annualized rate of 103 percent in the second quarter of 2014. The increase set the rate at its highest point since the third quarter of 2012.
“These turnover rates show that the shortage is acute,” Costello said, “and if the freight economy continues to grow, it will worsen very quickly.”
One reason is that “some new drivers don’t know what they are getting into,” said Jack Scarborough, senior health, safety and environmental consultant at ESIS Inc., the risk management services division of the ACE Group.
“If they last the first few months to a year, they may last a few years, but after that they want to transfer to local work to stay closer to home.”
That drain on the long-distance driver pool adds to the strains of a diminishing overall workforce.
“Drivers are in very high demand, and not a lot of people are going into the industry; we have got the challenge of an aged workforce,” said Justin Russo, senior vice president of risk management for Energi, a national underwriter specializing in the energy sector.
“Out of necessity, trucking firms have to hire drivers just out of school. Schooling can help prospective drivers pass the test,” said Russo, “but does not necessarily teach them how to drive the truck.
“It takes time to accumulate experience. Our prospects, even our insureds go through strict underwriting that includes their hiring and training practices, as well as operations, maintenance, and regulatory compliance.”
Energi has also taken a direct hand in training. It has a fleet of seven simulators built by L3, the same firm that makes them for military training.
“We bring the simulator to the insured’s site,” Russo said, “and based on their loss history, we build driving scenarios around the situations their drivers are most likely to face.”
Russo detailed other technology, including cab-mounted cameras that look outward, “to help determine liability in case of accidents,” as well as more prosaic tools, such as devices to block cell-phone calls.
“Technology in the cab can certainly help, but it can hurt if it leads to distracted driving,” he said.
The best support for safe operations and high standards for drivers is often underwriting. “Clean operators with few incidents and all their paperwork in order are likely to pay less for insurance than ones with more losses,” said Russo.
Steven Rodriguez, president of third-party P&C claims for York Risk Services, an underwriter, reinsurer, and claims administrator, has more than two decades of experience in trucking.
“Truck technology is great these days; the transponders report location, speed, route, but at the end of the day what matters is the driver,” said Rodriguez.
“The better companies are thinking ahead on training, records, medical screening. They have a discipline around hiring. But the million-dollar question is that if you have to get a piece of business out the door, what do you do?”
He stressed the risk management aspects of driver quality and availability.
“In the claims we are seeing, the planning is just not there. Good companies and good drivers are in sync with the road, with each other, with the dispatchers on route and road conditions and weather. That is important because even good drivers can be put in bad situations.”
Rodriguez noted that technical data, planning, and driver performance will be used one way or another. It can be used for advance planning, risk management and training, or even in litigation.
“It starts with hiring and keeping the best people,” said Rodriguez, “but if you can’t find enough of them, what do you do? At the very least, you have to have the basic tools of business practice. Not just mission statements and standards, but working business practices.
“I know small operators who use very granular details from their trucks’ transponders to plan their operations and as the basis of retraining on the basics for drivers.”
The segment of the trucking industry that handles energy, chemicals and hazardous materials is already subject to much more stringent regulation than other segments. In general, it is able to charge higher rates because drivers must be highly trained in materials handling and emergency procedures.
Given the specialization of the energy and chemicals sector, opportunities for transfer of best practices to the broader general-freight operations are limited, but do exist.
An April 2014 report by Jeff Melo and Mike Billingsley, risk managers on the group’s health, safety, and environmental team at ESIS, addressed the entire energy sector, from large complex drilling equipment being moved over the road, to local and long-haul transport of oil, chemicals, and wastewater.
It noted that the energy sector is more dependent on trucking than might be commonly understood, given the prevalence of pipelines, railcars and tankers.
“Oil and gas operations continue to grow across the lower 48 states, but that growth could not occur without the fleets of trucks that carry the drilling machinery and other needed equipment and resources,” according to the report.
That reliance on trucking means that “energy companies and their affiliates confront many exposures related to this high-risk activity, due to driver demand and an inexperienced driver pool across the U.S., increased state and federal regulatory burden and oversight, and drivers operating in unfamiliar rural and urban locations.”
“Through a robust and proactive risk management strategy that integrates health, safety and environmental components, risk reduction is possible.”