YOUNGSTOWN, Ohio – Despite a nationwide driver shortage, higher fuel prices, disruptions in the supply chain, inflation and market anxiety over what lies ahead, business still rolls pretty smoothly for local transportation companies.
That’s not to say there aren’t major bumps in the road. Tractor-trailer dealers, for example, continue to wrestle with limited allocation from manufacturers, squeezing inventories across the country. On top of that, parts shortages and higher wholesale and retail prices complicate an industry already saturated with demand.
“What we’re seeing is there’s a lot of pent-up demand that’s still out there,” says Geoff Fleming, co-president of Aim Transportation Solutions Inc., Girard. “We’ve had strong, solid sales activity.”
Aim derives most of its business through its leasing division, Fleming says. The company has some 10,000 trucks under long-term contract at locations across the country, most of which are leased. The company also has a rental division, an integrated logistics division, a shop management service and a brokerage operation.
“We’ve been experiencing great activity levels,” Fleming says. “But all indications are that this demand is unsustainable in the long-term.”
Pressures such as inflation, he says, are likely to “slow down activity sooner than later. We’re just not seeing it yet.”
Among the greatest challenges affecting the industry is the significant shortage of truck drivers, a trend that long predates the pandemic, but has accelerated since. Aim also operates a dedicated service, in which the company provides trucks and drivers for customers.
The industry is down more than 80,000 drivers, according to the American Trucking Associations. That number could surpass 160,000 by 2030, the organization estimates. At this rate, the trucking industry would need to hire nearly one million drivers over the next decade to replace retirees, those who leave voluntarily or involuntarily, and new drivers required to meet freight demand.
At Aim, Fleming says, hiring new drivers has improved over the last year, as well as retention. “We’ve seen numbers pick up,” he says, noting the company recently added a new recruiting director.
Higher wages, lucrative signing bonuses and improved benefits have all helped to sweeten the prospects for drivers, Fleming says. The downside is that turnover across the industry is very high, motivated by either competitive offers from other transportation firms or other positions in different industries. “A turnover rate of 50% is considered good in this industry,” he says.
Short-term rentals are also hot at the moment, Fleming says, mostly because many companies are finding it hard to secure new trucks. “Because of manufacturers’ allocations, companies are desperate for trucks. So they’ve been renting from us. That business had been high.”
Original equipment manufacturers, or OEMs, are building new tractors as fast as they can, says John Cerni, president of Trivista Companies, formerly Cerni Motors, in Austintown. Factories, he says, have experienced labor shortages as well, while supply-chain bottlenecks have constricted deliveries of parts such as tires, plastics and microchips.
“There’s a lot going on that we can’t control,” Cerni says. “Parts are coming in slow, but sure, and factories are having trouble keeping people.”
That’s led to manufacturers placing dealers such as Trivista on limited allocation, Cerni says. Earlier, the manufacturer slashed deliveries to the dealership by 20% and Cerni expects another 20% cut this year.
“We’ll probably get half of the trucks that we have coming,” he says. “If a truck comes in, it’s usually gone within a week.”
As such, Cerni expects business to be off approximately 20% this year compared to the previous year.
At the same time, retail prices for products – Trivista sells International brand tractors and Benson and Fruehauf trailers – have risen between 20% and 25%, Cerni says. “Some of our customers are accepting that; others are saying ‘no.’ ”
Cerni says that the shortage of new rigs has forced fleet owners to hold on to their trucks longer, causing greater maintenance problems. “There just aren’t enough trucks out there,” he says. “The trucks people are keeping are accumulating miles, leading to bigger repair costs.”
The supply chokehold has left dealers such as Cerni frustrated because they simply lack sufficient inventory to satisfy customer demand. “The only things we can control are our service and customer relationships,” he says.
Still, sales of new Class 8 trucks posted their best month of the year in June, data show.
According to a published report in TheTrucker.com, which cites Ward Intelligence, Class 8 tractor sales hit 22,358 units in June, a 7.9% improvement from the previous month of May and a 12.7% increase from June 2021.
“Somehow, they’re getting trucks to us,” Cerni says. “I don’t know how long that’s going to keep up.”
There are also signs the trucking industry is continuing to transition to a contract-based market.
The American Trucking Associations’ advanced seasonally adjusted tonnage index increased 2.7% in June after rising just 0.3% in May.
“While the spot market has slowed as freight softens, contract carriers are backfilling those losses with loads from shippers reducing spot market exposure,” ATA chief economist Bob Costello said in a statement. “Essentially, the market is transitioning back to pre-pandemic shares of contract versus spot market.”
The trucking industry often serves as a good barometer of the overall economy, says Bill Strimbu, president of Nick Strimbu Inc., a trucking company based in Brookfield. As such, Strimbu sees signals of a softening market.
“We’re the first to see the signs of a recession,” he says. “There is some indication that things are slowing down, especially in the steel market. Hopefully, it’s just a blip.”
Strimbu says there’s overcapacity in steel and also in the food industry, which places pressure on smaller carriers that find it hard to secure freight on their own.
Moreover, higher fuel costs and parts pricing make it hard for small haulers to compete, he says.
“We had a boom for awhile and now it looks like it’s getting a little soft,” he says.
Strimbu operates 120 Class 8 Freightliner trucks, and hauls mostly steel, building materials, products for the food industry, propane tanks and equipment such as guardrails. “We try to be as diversified as possible so if the economy does tank, we can keep our trucks busy,” he says.
Eighty of these trucks are refrigerator vehicles, which could be used to transport refrigerated food products inbound to customers or dry goods for backhaul trips.
Strimbu says the supply chain has loosened up in terms of securing new equipment for his operation. “It’s a sign that things are getting caught back up and we’re not having as hard a time finding parts as we were a few months ago,” he says.
Allocation of new Freightliner trucks, however, remains very tight, Strimbu says. “We got cut on our orders this year and it remains to be seen as to what’s going to happen in 2023.”
As such, Strimbu and other trucking firms are taking measures to extend the lives of their fleets as long as possible. “We just have to keep them on the road a little bit longer until our suppliers can catch up.”
Nevertheless, business remains strong and demand for drivers has never been greater. “We’re busy,” Strimbu says. “We need more drivers. They’re tough to find.”
Turnover at the company is relatively low – 38% – compared to the industry average, Strimbu says.
Key to this is remaining competitive with wages and benefits, since there is heavy solicitation from other companies. “On average, a driver here earns between $75,000 and $80,000 a year,” he says. “Wages have increased a lot in the last three years. We have to stay ahead of it.”
Strimbu credits truck drivers and the industry as the unsung heroes of the pandemic, emphasizing they continued to deliver the needed goods and services during a very troubling time.
“These drivers never stopped during the pandemic,” Strimbu says. “They got everything delivered in this country that needed delivered to sustain people. They’re very much unappreciated and they do one heck of a job and they’re to be applauded for it.”
Pictured at top: Geoff Fleming says Aim Transportation Solutions Inc. is seeing strong demand that may not be sustainable.