How a Booming Economy is Affecting Fleet Solutions
With the economy nearing an all-time high and the unemployment rate lower than it has been in 50 years, the United States seems to be more stable than ever. But that is not the case for every industry. While most industries can capitalize very literally on a booming economy, the trucking industry struggles to leverage the state of the economy because of an extreme demand — a demand that is challenging companies to develop better fleet solutions and strategies in hopes of taking advantage of the prosperous economic landscape.
The Commerce Department reported Friday that gross domestic product, the broadest measure of goods and services produced in the economy, grew at a 4.1 percent rate in the second quarter of the year. Consumers led the way, shrugging off higher gasoline prices and sluggish wage growth to step up their spending on everything from cars to clothes to restaurant meals. — New York Times
Growth like what we are currently experiencing has serious consequences on the trucking industry, and the consequences are not all positive. We have already talked a lot about the driver’s shortage and, as the Washington Post recently reported, that shortage is growing. They show that the industry has roughly 63,000 open positions this year alone with that number expected to double in the coming years. That is bad news for the industry, but could also mean bad news for the U.S. economy through higher prices and delays in shipping. Fleet solutions and strategies are addressing the situation daily hoping for the right answers. Wages have increased to $70,000 a year in some cases along with substantial benefits that include shorter shifts that allows for more balance in home life. Still, what these companies are offering is not working and the demand is not waning.
The biggest challenge for trucking companies is that the most effective fleet solutions seem to be changing as quickly as the economy is changing. January of 2018 marked the second highest order total in trucking history. That is an unfathomable situation and one critical to address.
A report from NPR claims “(According to an industry analysis by DAT Solutions) just one truck was available for every 12 loads needing to be shipped at the start of 2018, which is the lowest ratio since 2005.”
CLP systems Identifies 4 Primary Factors for the Demand
1. Tax Cuts and Jobs Act: Industry experts are claiming recent legislative changes have paved the way for the rise in demand. Specifically, experts believe that the Tax Cuts and Jobs Act, which was signed into law in December of 2017, is the major force allowing for companies to reduce their tax rate. It also permits full expensing of most types of equipment placed into service between September 2017 through December 2022. These legislative changes have caused a surge in the market, leaving more products available for transport than the industry is currently able to meet.
2. Driver Shortage and Turnover: Another huge cause of the trucking shortage is the apparent lack of willing and qualified drivers. With the need so dire, it is now commonplace to see advertisements on the backs and sides of these large vehicles asking for qualified drivers to join their company on the roads. However, an article from USA Today claims that the shortage in drivers during this massive increase in demand for trucking services is due to the poor pay and conditions of the job – equating the issue to driver turnover rather than an actual shortage ofdrivers.
3. Electronic Logging Devices (ELD): The Tax Cuts and Jobs Act was not the only new legislation Trump recently passed that affects the trucking industry. December marked the industry with a new federal safety regulation to keep track of driver’s hours with electronic logging devices. According to a Wall Street Journal report, this caused regular one-day routes to shoot up in price and time due to drivers needing to meet the new regulation. Whereas before, drivers had more flexibility with their time on the road, they now feel monitored and pressured to meet the new requirements that subsequently make their job more difficult.
4. Surge in Diesel Pricing: In 2018 we have seen major increases in the price of diesel fuel. The Department of Energy reported the average price of diesel fuel has risen 52.8 cents compared to a year ago. A February article of Transport Topics related that, “The average price of diesel rose 1.6 cents to $3.089 …It marked the fourth consecutive week of average diesel prices above $3.” While this increase is affecting the entire country, it is especially hitting the New England and California areas the most. These increasing fuel prices are adding yet another strain to an industry that is just trying to keep up.
Fleet Solutions That are Helping
It is not all doom and gloom for these companies. There is a lot of hope, and while the industry is acknowledging that the driver shortage needs to be addressed by offering higher wages and better benefits, they are also turning to technology to help with the bottom line and financial fleet solutions, so they can spend more time on the human aspects of their companies. Industry leader EFS continues to specialize in payment, data and technology to help streamline processes, provide valuable insights and ensure the growth of the company. Trucking companies are enlisting the help of EFS for fleet solutions like fleet cards, mobile solutions and vendor payments. EFS also has capabilities and tools to stay on top of regulatory and compliance issues all the while collecting an abundance of data that can further contribute to even more effective strategies.
Thankfully fleet solutions like these are providing company owners confidence and peace of mind that their financials are being handled by the experts, leaving them to focus on things like driver recruitment and retention while tackling the incredible demand that an ever-expanding economy seems to be pushing their way.