Truck, Driver Shortages Seen as Transport Demand Rises

This story appears in the April 19 print edition of Transport Topics.

TUCSON, Ariz. — Executives with two of the nation’s largest motor carriers said freight demand has jumped so fast in recent months that some sectors are having difficulty finding trucks to transport their goods.

“About mid-February it was almost like someone flipped a switch and things started popping, capacity was getting tighter,” Steve Elliott, vice president of brokerage operations for Schneider Transportation Management, said here April 8 during the Transportation Intermediaries Association’s annual conference.

Elliott, whose company is a division of truckload carrier Schneider National Inc., said that following a solid March, demand in April has remained “pretty strong as well.”

“I’ve told shippers, ‘Rates are going up, guys, and they’re going up quickly,’ ” Elliott said.

Craig Littzen, vice president of solutions and intermodal network at Swift Transportation, Phoenix, Ariz., shared Elliott’s feelings.

“We’ve seen a significant recovery in the short term,” Littzen said. “Over the last 90 days we’ve been very pleased. When we look at recovery, we see recovery both in price and in other aspects of capacity utilization.”

Littzen said logistics providers still face pressure to contain their costs, largely because negotiating higher prices with shippers is a challenge because they’ve become accustomed to 2008-2009 prices that were “extremely low.”

In recent years, Swift reduced its fleet size to 15,000 tractors from 20,000 three years ago.

“Now we’re going the other way,” Littzen said. “Love thy trucker because you’re going to need him.”

But it’s not easy to expand the company’s fleet, Littzen said, because Swift is paying an average of $12,000 more per truck than the cost of the trucks downsized during the recession.

Wayne Johnson, director of logistics for wallboard manufacturer American Gypsum Co., Dallas, did not dispute the trucking executives’ claims.

He said he has had difficulty finding trucks to ship his company’s products.

“I can tell you that in the last month-and-a-half, what we are able to ship and what we would like to ship have not been equal,” Johnson said. “We know that there’s a capacity crunch out there right now.”

Johnson told brokers that “shippers are listening to what you’re saying about price increases.”

Kent Stuart, executive director for business development at C.H. Robinson Worldwide Inc., Eden Prairie, Minn., said his company is seeing capacity tightening and prices improving.

“When trucks are getting tight we start smiling,” Stuart said. “And, we’re smiling.”

But behind the smiles, brokers and truckers are also nervous, Tom Aumann, an operations executive for e-Vans Transportation Services Inc., Brookfield, Wis., told Transport Topics.

“The erratic movements of the market scare the hell out of everybody,” Aumann said. “I think everybody’s holding their breath and saying, ‘We feel good right now, but is it coming back to the normal cycles?’ Everybody’s feeling the uptick and trying to figure out what’s happening tomorrow.”

Aumann said that carriers are reluctant to add capacity because they’re worried about what the “new normal” is.

“I think that’s the tenuous spot we’re in,” he added. “I think everybody’s asking, “Is this stimulus money that’s going away or is it sustainable?”

For Schneider, the uptick began in the third quarter of 2009, Mark Rourke, president of truckload services for the company, told TT.

Earlier in 2009, the company had eliminated 7% of its capacity, he said.

But Rourke said that in recent months, Schneider is seeing a “big build of price” in the spot market, which it regards as a key measure when the market is in transition.

“For five months, that’s up 20% to 30% higher than it was a year ago,” Rourke said.

Rourke said that Schneider also keeps track of the number of offers it gets from its broad customer base when it tells them, “We don’t have a truck to move today.”

In that instance, the company is getting a “manyfold increase” in turndowns since the first of the year, the greatest number since 2006, Rourke said.

“All those things are trending in the direction that is showing there is some type of recovery, that either capacity has come out or demand is increasing,” Rourke said.

Another indicator of recovery is that the climate for acquisitions and mergers is improving in the transportation sector, said Ben Gordon, managing director of BG Strategic Advisors, Palm Beach, Fla.

“But for the markets, the big question right now is: Are we seeing a real recovery, are we back to life, or is it rigor mortis?” Gordon said.